Indian Sovereign bond market participants dumbfounded as bond buying at standstill

The recent unfavourable cocktail mix of rising the US Treasury yields and weakness in local currency has left the Indian Sovereign bond market participants dumbfounded at the time when there is no buying appetite amid uncertainty over domestic interest rate stance. On Wednesday, the 7.17%-2028 gilt ended at Rs 96.15 (7.74%) after hitting intraday low Rs 95.90(7.77%) compared to Rs 96.52 (7.74%) at the close of the previous session.

“Looking at how the global treasury yields are moving, the similar momentum of sell-off is being registered in Indian bond markets as well. Also, depreciation in local currency is not supporting the case of any revival in overseas fund flows into Indian debt,” said a senior bonds trader with a major state-run primary dealership.

The 10-year bond yield should hover in the range of 7.70-7.80% levels given that there is no further spurt in global yields, the trader added.

Singapore-based DBS Bank believes that the backdrop for emerging market bonds remains challenging.

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The rupee has depreciated approximately 5% against the dollar since the beginning of 2018 on adverse global and domestic factors. 

Source: DNA Money (TNS)