The yield on 10-year benchmark government securities hit the 3-year high of 7.192 per cent in intra-day trade in the money market, reflecting inflationary concerns and expectations of faster hikes by the RBI in the months ahead. The yield closed two basis points higher at 7.14 per cent — a 3-year peak.
On Friday, the yield had risen by 21 bps to 7.12 per cent after the RBI announced its plan to focus on inflation and suck out liquidity from the market.
“Going ahead, heavy supply burden, absence of explicit RBI support and an early reversal in policy stance is expected to keep the bond markets jittery. We expect the new range of the benchmark 10-year yield (6.54 per cent securities 2032) to now shift to 7-7.30 per cent range in the near term,” Kotak Mahindra Bank said in a report.
“The hawkish FOMC followed by a bold reversal in the MPC’s shift in policy guidance in favour of inflation over growth completely jolted the bond markets. While some relief through the HTM limit increase to 23 per cent till March 2023 was provided by the RBI, the conviction for explicit support to the bond markets was less visible thereby unnerving the markets,” it said. The Sensex fell 483 points, or 0.81 per cent, to end at 58,964.57. The Nifty50 closed at 17,674.95, down 0.62 per cent.
The rupee settled almost flat at 75.94 against the dollar.