Bond Losses Set To Rise As Dissent Breaks Out At RBI: Report

The bond yields in India will rise by year-end as disagreement among central bank's rate-setting panel members indicates they are moving toward a more hawkish stance, a Bloomberg survey has found

The bond yields in India will rise by year-end as disagreement among central bank's rate-setting panel members indicates they are moving toward a more hawkish stance, a Bloomberg survey has found. The benchmark 10-year yield will climb to 6.40 per cent by December, while the five-year yield will increase to 5.90 per cent, according to the median estimate in the survey of 15 traders, fund managers and economists conducted this week. The 10-year yield closed at 6.23 per cent on Thursday, and the five-year at 5.74 per cent. Bearishness toward the country's sovereign debt increased after one of the six Reserve Bank of India monetary policy panel members voted against the lower-for-longer stance at last week's policy meeting. That was a departure from previous gatherings this year when they had been unanimous on the need to support growth amid the coronavirus. "What caused the unease for the market was that the vote for the accommodative stance was 5-1," said Badrish Kulhalli, head of fixed income at HDFC Life Insurance in Mumbai. "The expectation is that, once the minutes are out, they may show a greater amount of debate about the time period for maintaining the accommodative stance." Two other bond negatives also came out of the meeting. The RBI raised its average inflation forecast for the current fiscal year to 5.7 per cent from 5.1 per cent, and said it would increase the amount of money it drains from the banking system via its variable rate reverse repurchase agreements.