Why GS Bond market is correcting?

There has been fall this week in short -long term bond yield close to 150 basis points.Why this fall even though no change in repo rate by MPC ? Any insights on this ,reasoning

1 Like

May be in anticipation of a Rate Change

It fall even after its remain unchanged for coming whole year, announced today !!

@nithin , can anyone give some insights of this sudden bond yield correction around 150 basis points even though RBI didn’t increase ( and will not till next financial year) interest rates and Inflation being accommodative.

My two cents. Government has a big borrowing plan lined up with large deficit. RBI Governor has also updated that every week 20000 crores bond can be released. This is having an impact on the bond prices and hence the yield. Today government securities market was very volatile.

2 Likes

Thanks for inputs, but ideally with huge demand from Govt ideally prices should shoot up as per Demand supply market theory but it happened opposite,there was huge selloff after policy announcement at 10:25am !!

Came across an article which talks about that selloff -

Indian sovereign bonds declined as the Reserve Bank of India’s measures to support the bond market fell short of expectations.


The above article is a reprint of a Bloomberg article, which has been updated since (its headline has been changed and some of the copy has also been modified). Few relevant paras -

Benchmark 10-year yields post worst weekly drop since April

The sell-off in government bonds led to the central bank rejecting all bids for the benchmark 2030 bonds and 2025 notes, while underwriters stepped in to rescue sale of two other notes.

2 Likes

Thanks

So are the Bonds expected to continue to fall for a bit longer? Or what had to happen has happened?

Not an expert in this domain but the market is trying to find a new equilibrium (aka justified yield) after the massive borrowing announced by the Govt. This article explains it well -

One of the recommendations in that article was that RBI expedite some of its OMO purchases which seem to be happening -

2 Likes

Thanks!! :slight_smile: If one wants to increase their knowledge about the Bond Market, is there any resource/website/youtube channel etc that you can recommend? Where do the so called experts get trained on all this? :sweat_smile:

Most likely it has bottomed out or would consolidate in same range for some time until RBI announces any concrete dates /plan for govt borrowing .RBI would intervene as it has done in past if there is any significant panic. RBI governor has said multiple times about there liquidity stance in Bond market,which they also did last year.

thats what i also wanted to know. Not of G-Sec but of NCD in my other post where i mentioned that PFC floating rate bond has corrected by 4%. Maybe increase in interest rates is the reason behind it.

2 Likes

I think the correction is still going on as Yield’s continue to go up?

Yes, Its the global phenomenon now. US, Europe has a decade high yields. This has also caused huge selloff in Stock market as well around the globe.

1 Like