Business Standard ·
Traders brace for prolonged India bond slump as RBI mops up excess cash
Bond traders expect yields to rise as the RBI drains excess liquidity amid higher oil prices, rising inflation and heavy government debt supply
A sense of unease is gripping India’s bond traders as they fear the central bank’s push to drain excess cash from the financial system, just as inflation picks up and a global debt selloff intensifies, will spark an extended slump.
ICICI Securities Primary Dealership Ltd., one of the nation’s largest underwriters of government debt, and IDFC First Bank Ltd. are among those predicting the benchmark 10-year yield to potentially surpass the 2026 peak hit in May and climb as high as 7.25% by Dec. 31. That would be the highest level in three years. Citigroup Inc. has brought forward its expectation for an interest-rate hike by the Reserve Bank of India to October from December.