India's 10-Year Yield Surges As RBI Bond-Purchase Results Disappoint

Reserve Bank of India (RBI) purchased Rs 25,000 crore worth of bonds under G-SAP or government securities acquisition programme

The benchmark 10-year bond yield elevated on Thursday to its highest level in a week as the outcome of the first tranche of the Reserve Bank of India's bond-purchase programme disappointed traders while inflation concerns also weighed. RBI purchased Rs 25,000 crore worth of bonds under G-SAP or government securities acquisition programme, under which it has committed to buying 1 trillion rupees worth government paper between April and June to aid the absorption of the centre's massive 12.06 trillion rupees borrowing in 2021/22. "Traders were hoping the RBI would buy more of the 10-year paper. It bought only Rs 7,500 crore of that bond versus expectations of nearly double that amount," a senior trader at a private bank said. The RBI has repeatedly assured investors of maintaining ample liquidity in the banking system and doing whatever is required to ensure that the government's borrowing programme sails through smoothly, though the measures have always fallen short. "I think one way may be to keep a surprise element and do creeping secondary market purchases rather than open announced OMOs (open market operations) that too after a week," Bekxy Kuriakose, head of fixed income trading at Principal Asset Management said. "It will also help in improving secondary market liquidity," she added. The benchmark 10-year bond yield ended at 6.13 per cent, its highest since April 7, and up 12 basis points from its previous close. An acceleration in inflation also weighed on bond prices.