Tuesday, September 26, 2023

Benchmark bond yield rises 10 bps on hawkish Fed stance

PUNJAB NEWS LINE | September 22, 2022 06:39 PM

MUMBAI: The yield on the 10-year benchmark bond rises around 10 basis points on Thursday after the US Federal Reserve raise their policy rate by 75 basis points and hawkish commentary by Fed.

The 10-year benchmark 6.54 per cent -- 2032 bond yield ended at 7.3878 per cent, as against 7.2525 per cent close on the previous trading session.

"With the fed rate hike and hawkish tone as commentary has made the markets a bit nervous, we have our MPC meet at RBI policy in next week and rate hike is keeping players on a alert mode," said Ajay Manglunia, Managing Director & Head Investment Grade Group at JM Financial.

The US Federal Reserve raised rates by 75 basis points as expected and flags more hikes in future on Wednesday.

The Fed's new projections showed its policy rate rising to 4.4 per cent by the end of the year, before peaking at 4.6 per cent in 2023 to curb uncomfortably high inflation. Rate cuts are not expected until 2024. He added that the Fed's actions are likely to result in slower growth and higher unemployment.

Market participants are now expecting the Reserve Bank of India (RBI) to hike repo rate by 35-50 basis points in the upcoming monetary policy due next week.

"RBI's liquidity stance will be key to watch in the upcoming monetary policy. Will they still target neutral to surplus liquidity environment? Or, Will they allow liquidity condition to go into sustained deficit in line with the tightening monetary policy stance in light of emerging external risks," said Fun Manager, Fixed Income at Quantum Asset Management Co. Pvt Ltd.

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