3 Jan 2022

Bond Market Outlook-Jan 2022

Bond yields are likely to maintain uptrend as domestic core inflation stood at 6.2% levels along with record level of inflation in US.

author dp
Team INRBonds
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Bonds that are trading at high spreads to g-sec will withstand the rise in g-sec yields as there is enough room for spread compression.

Bond yields are likely to maintain uptrend as domestic core inflation stood at 6.2% levels along with record level of inflation in US. In the last US Fed meeting, 3 rate hikes have been indicated with reduction of bond purchase from current month. Bank of England has raised policy rates which leaves room for other central banks to contemplate on rate hike. 

During Apr-Nov’21, India’s fiscal deficit stood at 46% as compared to 36% during Apr-Oct’21.

Name of Parameters

31-12-2021

30-11-2021

31-12-2020

Benchmark Gilt 5-year yield

5.79%

5.65%

5.04%

Benchmark Gilt 10-year yield

6.45%

6.33%

5.87%

Benchmark Gilt 15-year yield

6.88%

6.76%

6.26%

SDL 10-year yield

7.00%

6.87%

6.52%

SDL 15-year yield

7.11%

6.92%

6.62%

SDL 25-year yield

7.11%

6.94%

6.65%

5-year AAA PSU yield

6.22%

6.08%

5.51%

10-year AAA PSU yield

7.01%

6.95%

6.59%

Systemic Liquidity(Rs billion)

 6729.07

7749.62

6250.24

Fiscal Deficit(% of full year target)

46.2%(Apr-Nov' 21)

36.3%(Apr-Oct' 21)

135.1%(Apr-Nov' 20)

Consumer Inflation

4.91%(Nov-21)

4.48%(Oct-21)

6.93%(Nov-20)

Core Inflation

6.2%(Nov-21)

6.1%(Oct-21)

5.83%(Nov-20)

Index of Industrial  Production

3.2%(Oct-21)

3.1%(Sep-21)

3.6%(Oct-20)

10-year UST yield

1.51%

1.46%

0.92%