Government bonds written in a note. Trade concept. | Photocredit: Designer491
The first cheers about the larger than expected 50 basic reduction reduction made way for disappointment on the market for government effects (G-SECs) on Friday, because the tariff panel of the RBI announced a change in the monetary policy position from “accommodation” to “neutral”.
Proceeds from the new 10-year-old benchmark G-SEC (6.33 percent GS2035) was hardened to close about 5 basic points higher at 6.2373 percent, at the previous closure of 6.19 percent.
Opening with a yield of 6.1965 percent at earlier closure of 6.19 percent, the 10-year G-SEC tested an intraday depot of 6.1060 percent after the announcement of the surprise 50 Basispoint interest rate reduction.
However, after the change in the monetary policy position, this safety gave profits, with the yield to an intraday high of 6,2405 percent increased.
“With today’s actions, the Repo rate at 5.50 percent is probably awarded to a bottom. However, the presence of abundant liquidity means that the permanent deposit facility will continue to act as the operative policy percentage, which will lead in the short-term money market behavior.
“The change of posture of” accommodation “to” neutral “is the biggest dampers, especially for long-term G-SECs,” said V Rama Chandra Reddy, Head Tenite, Karur Vysya Bank.
The return of the 10-year-old benchmark bonds is expected to trade the reach of 6.10 percent to 6.25 percent, taking into account the liquidity support and neutral attitude, he added.
Avnish Jain, Head of Permanent Income, Canara Robeco AMC, noted that the G-SEC market is lizard.
He noted that the RBI governor further announced 100 BPS CRR -cut, which again led to partial recovery in markets.
In the future, however, the market yields can be reach, because the liquidity remains sufficient and the speed of the speed of 50bps remains, spending the night can float around 5.20-5.3 percent reach (lower end of the liquidity adjustment facility corridor).
Global signals
Jain said that markets can now be driven more by global signals with a view to American trade policy. In the short term, 10Y yield can float between 6.20-6.35 percent reach.
Nuvama Wealth noted in a report that the 10-year-old (old) benchmark (6.79 GS 2034) turned little to 6.25 percent for the outcome of the MPC meeting. It closed at 6.29 percent.
“The proceeds fell quickly after the RBI had announced a repo-interest reduction by 50 BPS (in contrast to the market expectations of a relaxation of 25 BPS).
“However, the movements lower in the yields were not held and began to return after the MPC has changed the policy position of accommodation in neutral, which indicates a very limited space to further relax,” according to the report.
Referring to the 100 BPS CRR cut into four equal tranches from September fourteen days, Nuvama officials said that this almost dropped the almost one of the curve faster.
In the postal policy conference, the governor emphasized a better and faster transfer, while also indicating an extensive break, they added.
Published on June 6, 2025
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