The bond market continues to await much-needed support from the central bank even with yields rising to 6.4 per cent again this week. The benchmark yield closed the week at 6.39 percent, up four basis points from the previous week.

One factor in higher yields – US Treasury yields – has fallen this week. The 10-year US Treasury yield fell to 1.55 percent last week from 1.64 percent the previous week. However, crude oil prices, which remained pressure on domestic bond yields, continued to remain at higher levels last week. The price of Brent crude exceeded $86 a barrel before closing the week near $84 a barrel.

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Furthermore, the part rate for variable rate reverse repurchase auctions remains high. The central bank held a seven-day auction on VRRR with the stop coming in at 3.99 per cent. Earlier this month, the seven-day VRRR auction moratorium reached 3.61 percent. RBI also announced a 28-day VRRR auction next week, indicating a higher period. Market participants say that although the central bank’s stance on liquidity has been clarified during monetary policy and a rise in quantity was expected, an increase in duration is not helping under current market conditions as nothing is helping yields.

Vijay Sharma, Senior Executive Vice President at PNB Gilts sees the RBI’s bond market support currently missing. “Recently, there was the announcement of the VRRR auction with a higher duration of 28 days. All of this seems to indicate that the central bank is still not comfortable with the current level of yields. The market has lost its momentum and until the moment you see a helping hand from the Reserve Bank of India, it may You continue to see yields at these levels. The market tried to recover but quickly lost its charm. With each day the central bank delays its return, the chances of a breakout of the 6.4 per cent level over the benchmark yield increase. The only thing that was finding some kind of preference from the market was the bond-priced Floating. With the central bank conducting a massive transfer auction, even the demand for FRBs has been hit.”

Next week, bond markets around the world will be closely watching the US Federal Reserve meeting where it is expected to announce the unwinding of its bond-buying program.

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