Bond yields rise to 3-year high on RBI liquidity cut
Yield on the 10-year benchmark security, used to price mortgages, other retail loans and commercial advances, rose to its highest since March 2023, after having hit a high of 7.40% intraday, up from 7.30% Friday.
In a significant financial shift, India’s government bond yields have hit a three-and-a-half-year high of 7.39%, primarily due to the central bank’s strategy to minimize liquidity. Over the past month, the yield on the 10-year benchmark has surged by 38 basis points. The Reserve Bank of India plans a bond sale of ₹25,000 crore this Tuesday while also raising the cash reserve ratio to 99%, effective from mid-October.
The 10-year yield has surged more than 5%, or 38 basis points, over the past one month, investing.com data showed.
Read more: Polycab India’s F&O exit: NSE sets December 30 deadline; NCLAT stays insolvency order
The RBI will sell ₹25,000 crore of bonds through an OMO auction on Tuesday. On Friday, RBI raised the minimum daily cash reserve ratio maintenance requirement to 99% from 90%, effective mid-October. It followed it up with restrictions forward dollar purchases imposing a 20% cash reserve requirement on forex derivative contracts above $2 million.
