Yields in the Indian bond market may have plateaued as the interest rate hike cycle is possibly in its last leg, supported by positive signs in the economy, both domestically and internationally.
Experts believe this could be the best time to book a fixed bond scheme before the Reserve Bank of India (RBI) cuts back its repo rates, expectedly next year.
On Friday, the Reserve Bank of India (RBI) has announced another weekly auction of treasury bills and state government bonds of various tenures.
The bidding will close at 8 am on May 31. The unified payment interface or UPI and net banking customers can make their payments by 8 am on May 31 and 11 pm on May 29, respectively.
This time, the treasury bill yields for three months, six months and 364 days are 6.73 per cent, 6/87 per cent, and 6.89 per cent, respectively.
In state government bonds, Mizoram is offering the highest interest rates of 7.45 per cent (May 31, 2036), with a maturity period of around 12 years, followed by Sikkim 7.40 per cent (May 31, 2033) and Andhra Pradesh 7.36 per cent (May 31, 2035).
A total of 15 states are participating in the auction. These include Telangana, Madhya Pradesh, Haryana, West Bengal, Meghalaya, Maharashtra, Kerala, Tamil Nadu, Nagaland, Rajasthan, Mizoram, Punjab, Sikkim, Manipur, and Andhra Pradesh.
Yields Fall Sharply
Says Venkatakrishnan Srinivasan, founder and managing partner of Rockfort Fincap LLP, a fixed income advisory firm, “With the expectation of improvement in liquidity in the banking system due to withdrawal of Rs. 2,000 notes, the money market yields went down sharply by 15 to 20 basis points last week. The money market instruments yield may continue to trade range bound in the coming week too. However, the 10-year government bond yields may inch up.”
Hence, Srinivasan says, “Traders now expects steepening of the curve in the government bonds. All the qualified institutional buyers and corporate treasuries have started investing in both government bonds as well as in the corporate bond market.”
In the corporate bond market, “We expect large bond issuances in the coming week”, including Power finance Corporation (PFC), National Bank For Agriculture And Rural Development
(NABARD), Housing Development Finance Corporation (HDFC), India Infrastructure Finance Company Ltd (IIFCL), HDB Financial Services, Tata Capital and others, he adds.