In the domestic market, yields on corporate bonds, treasury bills (T-Bills) and commercial papers have increased by 5 to 15 basis points. This increase has happened across all tenor bonds, T-bills and commercial papers. In fact, such a situation has come due to the high cut-off rate by RBI in reverse repo auction amid rising yield of government securities and decreasing demand among investors.
Yields up on corporate bonds, treasury bills and commercial paper
Ajay Mangaluniya, MD and Head, Institutional Fixed Income at JM Finanacials, says that the impact of US bond yields is visible in emerging markets. This is the effect of what is happening in the US market. However, this is an immediate reaction of the domestic market. Currently, the yield on 3-year corporate bonds in the domestic market is 5.20-5.26 per cent. At the same time, the yield ranges from 5.76-5.79 percent and 6.79-6.85 percent for the period of five to ten years.
The three-month commercial papers issued by NBFCs are trading between 3.82 per cent to 4 per cent. Commercial papers issued by manufacturing companies are getting yields ranging from 3.44 to 3.58 per cent. In the last three-four days, these have increased by 10 to 15 basis points.
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Yield is increasing due to the influence of the US market
RBI has increased the yield cut-off on treasury bills on September 29. A yield of 3.4488 percent is now available on treasury bills for 91 days and 3.5669 for 182 days and 3.8100 percent for 364 days. Anand Nevatia, fund manager of Trust Mutual Fund, says that the market is feeling that the RBI will now move towards policy normalization. The higher cut-off in the seven-day VRRR can have a major impact on the yield curve. This can affect the overnight rate to the rate of up to 5 years. In the US too, rising yields and rising crude oil prices have added to the pressure to raise yields.
(Article: Manish M Suvarna)
(The information in the story is the opinion of the relevant research analyst and brokerage firm. Financial Express Online takes no responsibility for the same. Investments in capital markets are subject to risks. Please consult your advisor before investing.)
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