Govt Bond Yield Rises After RBI’s Hawkish Stance on Taming Inflation

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Govt Bond Yield Rises After RBI’s Hawkish Stance on Taming Inflation
Credit: © Reuters.

By Malvika Gurung

Investing.com -- The Indian government bond yield jumped slightly over 7.3% after the Reserve Bank of India announced a 35 bps rate hike on Dec 7, taking the repo rate to 6.25%, however staying hawkish on the inflation outlook.

The central bank raised its CPI inflation forecast for the third and fourth quarters of the ongoing financial year to 6.6% and 5.9%, respectively, while retaining the country’s inflation projection for FY23 at 6.7%.

As a result, the benchmark 10-year bond yield rose to 7.3087% after the RBI MPC policy decision, from 7.2113% before the announcement. The bond yield dipped from Tuesday’s closing of 7.24% to 7.211% earlier on Wednesday due to oil prices languishing and Brent Futures falling below the $80/barrel mark.

However, with RBI remaining resilient in fighting inflation and arresting it under the mandated 2-6% tolerance band, the Indian government bond yield advanced even though the quantum of the repo rate hike was small and widely expected.

"The statement tilted on the hawkish side, and hence benchmark bond yield is back to 7.3% levels,” cited a source to Reuters.

Read Also: RBI Retains FY23 Inflation Forecast, Revises CPI Figures For Q3, Q4

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