14 Mar 2022

RBI gave the market Rs 10 trillion on bonds in FY22 as yields rose continuously

In the first half of fiscal 20221-22, RBI held g-sec yields from rising as it coerced markets to absorb government bond supply at lower yields. G-sec yields then started rising in the second half and is at its highest levels at the end of the fiscal year, leaving investors with high losses due to rising yields.

author dp
Team INRBonds
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G-sec auction yield movement during FY22-

During Apr-June 2021,10-year benchmark (5.85% 2030) auction yield declined to 5.99% from 6.05%. However, during July-Sep 21, 10-year benchmark (6.10% 2031) auction yield rose to 6.18% from 6.10% touching peak level of 6.23% during Aug-21. During Oct- Dec 21, 6.10% 2031 auction yield increased to 6.40% from 6.23%. During last quarter of current fiscal year, new 10-year benchmark (6.54% 2032) yield increased to 6.77% from 6.54%.

 

RBI Bond purchase during FY22-

During FY22, RBI has purchased Government of India bonds worth Rs 2245.75 billion through G-SAP and special OMO while sold government bonds of Rs 400 billion.

 

Market Borrowing during FY22-

Rs billion

Gross Borrowing

Net Borrowing

Government of India

11043.82

8401.03

SDLs

6370.54

4655.08

 

During FY22, total conversion of government bonds stood at Rs 1365.97 billion.

 

Government bonds, SDL and OIS yield movements

 Last week, 6.54% 2032 paper yield rose by 5 bps to 6.86% while 6.10% 2031 yield increased by 5 bps to 6.89%. 5.63% 2026 yield rose by 5 bps to 6.08%. 6.64% 2035 yield gained 3 bps to 7.18%. Long-term paper, 7.16% 2050 yield rose by 7 bps to 7.3%.

 

The spread of 10-year bond over 5-year bond declined to 78 bps from 81 bps from previous week. The 15-year benchmark over 10-year benchmark spread rose to 31 bps from 28 bps while 30-year benchmark over 10-year benchmark spread increased to 43 bps from 40 bps on weekly basis.

 

Average 10-year SDL auction cut-off rose to 7.25% from 7.15% in previous week while spread rose to 36 bps from 34 bps.

 

On weekly basis, 1-year OIS yield rose by 14 bps 4.54% while 5-year OIS yield increased by 14 bps to 5.94%.

 

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