Bond Yields Rise For Third Straight Session On Thin Volumes
10-year bond yield continues to rise on thin volumes
Bond Yields ended higher for third consecutive session on Monday, albeit on thin trading volumes. Yields have been inching higher since the release of the minutes of the last monetary policy committee meeting, which were widely perceived as hawkish.
For the day, the benchmark 10-year yield ended at 6.57 percent as compared to 6.54 percent on Friday. It touched a high and low of 6.59 percent and 6.53 percent during the session.
If the 10-year yield breaches the 6.55 percent level by the end of this week, then it could trend back to pre-demonetisation levels of 6.80 percent, which is quiet worrisome. However, some comfort can be drawn from the fact of the sell-off is coming on low volumes.Dhawal Dalal, CIO – Fixed Income, Edelweiss Mutual Fund
The daily turnover of Indian bonds as per RBI negotiated dealing system stood at Rs 24,278 crore as compared to Rs 30,037.35 crore in the previous trading session. The average turnover in these last ten days has been at Rs 50,306.79 crore and that for the year has been at Rs 56,834.08 crore. The onset of Christmas and new year holidays have led to a seasonal drop in volumes.
As traders return in January, the focus will shift to incoming economic data which will give an indication of the impact of demonetisation. Fiscal deficit data due on December 30 and the upcoming union budget would also be closely watched.
