Acuité expects 10Y g-sec yield to move towards 7.25% by Mar-23

The 10Y g-sec bond yields remained jittery in the month of Feb-22 on the back of multiple domestic as well as global factors at play. The announcement of significantly higher than expected government's borrowing program in FY23 coupled with lack of clarity on India's inclusion in the global bond indices weighed on market sentiment, with 10Y g-sec yield jumping sharply to 6.89% on Feb 3 rd. Encouragingly, the yield cooled off thereafter by 20 bps with support from RBI's dovish monetary policy outturn in early Feb-22 and cancellation of two successive weekly g-sec auctions amounting to Rs 480 bn besides the cancellation of g-sec switch auction in Feb-22. However, the geopolitical standoff between Russia and Ukraine has nudged the crude oil prices above USD 110 pb pushing the yields at around 6.8%.

Acuité now expects RBI to move forward on interest rate normalization in Apr-22 or Jun-22 as headwinds associated with Covid gradually begin to moderate. With a year-end target of 6.75% now achieved earlier than anticipated due to the geopolitical standoff, Acuité expect 10Y g-sec yield to remain elevated at around 6.8% in Mar-22.

Link to the report

Source : Equity Bulls

Keywords

GSec BondYields AcuiteRatings BorrowingProgram RBI MonetaryPolicy