Gilt yields rise on global bond selloff

MUMBAI: A renewed bout of sell-off in the bond markets around the globe pulled down prices of government securities (G-secs) in India with the new 10-year yield rising to 7.8% and the old 10-year to over the psychologically important 8% mark on Thursday, nearly a 6-month high level for the old paper. Coming just a day before Rs 16,000-crore G-sec auction by the government, bond dealers said yields are expected to rise during Friday’s auction. Since a large number of banks and other lenders benchmark their lending rates to 10-year gilt yield, a rise in this benchmark may, at least to some extent, neutralize RBI’s 25-basis-point repo rate cut, aimed at spurring growth. On Thursday, the yield on the new 10-year gilt, introduced two weeks ago which matures in 2025, rose 7 basis points (100 basis points = 1 percentage point) to 7.81% as its price fell sharply. Bond yields and prices are inversely related. The yield on the previous 10-year paper, which matures in 2024, too rose sharply and closed at 8.01%, a level not seen since early December, 2014. Gilts of other maturities also hardened on Thursday.The rising yields are expected to have some impact on Friday’s gilt auction, bond dealers said. The government is scheduled to sell Rs 7,000 crore worth of new 10-year G-secs, and Rs 3,000 worth of each G-secs maturing in 2023, 2033 and 2044, an RBI release showed.The hardening of gilt yields was attributed mainly to a sell-off in sovereign bonds around the world, notably in Germany and the US. At 2000 IST, the US 10-year bond yield was at 2.32%, up from 2.10% a week ago, while German 10-year bond yield was near the 1%, up from near zero level just two months ago.