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In India, the yield on benchmark 10-year government bonds declined by six basis points to 7.35 per cent. The yield on 5-year bonds fell to 7.30 per cent at one stage before closing at 7.33 per cent.
The collapse of Silicon Valley Bank (SVB) of the US last week and the subsequent fall in global stocks triggered a fall in bond yields in India and the US on Monday.
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In India, the yield on benchmark 10-year government bonds declined by six basis points to 7.35 per cent. The yield on 5-year bonds fell to 7.30 per cent at one stage before closing at 7.33 per cent.
The benchmark 10-year US bond plunged 25 basis points to 3.45 per cent on Monday amid speculation that the US Federal Reserve may not hike interest rates in the wake of the SVB crisis. Even if the Fed hikes rates, it’s likely to be a small hike.
Investors turned cautious following the collapse of US-based SVB last week, which triggered a major sell-off in global equities. However, with US Federal banking regulators over the weekend taking decisions that would allow SVB depositors to access all their money on Monday with no loss to taxpayers, the sentiment is likely to recover in the coming days, said an analyst.
“A possible positive impact of the SVB crisis is that it may nudge the Fed to go less hawkish since the aggressive rate hike by the Fed lies at the root of the SVB crisis,” said V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services. If the US CPI inflation data tomorrow indicates a declining trend in inflation, the Fed is unlikely to raise rates by 50 bp in the March 22 meeting. “That will be a positive from the market perspective,” Vijayakumar said.
“We have seen a flight to safety. US treasuries have rallied by 30-50 bps across the curve. The possibility of a 50 bps hike in the March policy has gone down from 80 per cent to 35 per cent. The expectation of terminal rate has gone down from 5.70 per cent to 5.28 per cent. We believe US treasuries will continue to see safe haven demand for a few more sessions,” said an IFA Global report. How the saga unfolds until FOMC on March 22 and what the Fed feels about the episode will matter more now than the retail inflation print on Tuesday.
Meanwhile, the rupee pared its initial gains to settle 10 paise down at 82.16 against the US dollar on Monday, tracking the weak sentiment in the domestic equity market and foreign fund outflows.
© The Indian Express (P) Ltd
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