Bond yield rises over 9% as rupee hits 68.85 Vs dollar
Mumbai: The 10-year benchmark government bond yield rose to over 9 percent for the second time in less than 10 days on concerns RBI may announce more steps to stem the fall in rupee, which fell to a new life-time low.
The bond yield also rose as investors worry that the country's inflation may accelerate as crude oil prices rose to multi-month high, treasury officials said.
The 10-year bond yield rose to 9.04 percent in intra-day trades Wednesday before closing at 8.96 percent.
Oil prices rose today on worries over a military strike against Syria for alleged use of chemical weapons.
The Brent crude oil prices rose to USD 116-117 a barrel in Asia trades.
"With Brent crude oil rising to USD 116 a barrel and rupee sinking, it is a double whammy. The country's import bill will likely rise by nearly 9-10 percent," said Vijay Sharma, executive vice president, PNB Gilts.
The country's headline inflation climbed to 5.79 percent in July.
Care Ratings chief economist Madan Sabnavis said, "The 10-year government bond is mimicking what is happening to the rupee."
The rupee today plummeted to all-time low of 68.85 against the US currency before closing at 68.80. The local currency witnessed its biggest single-day loss of 256 paise.
The yield on government bonds also rose as market participants see Reserve Bank coming out with more steps to stem the rupee's fall.
"There is a fear that the RBI may announce more measures, like in past, to contain rupee's fall," said Sharma from PNB Gilts.
The RBI has been announcing, since July 15, some unconventional measures such as limiting banks' overnight borrowing at 50 percent of their net demand and time liabilities, more sale of government bonds and raising the interest rate on the marginal standing facility for banks and reduced availability of funds to curb speculation in the forex market.