Bond yields rise nearly 30 bps in Oct, to raise govt's interest burden ...Middle East

Economy by : (Business Standard) -
The sharp rise in government bond yields since the Reserve Bank of India's (RBI) October monetary policy review threatens to increase the government's borrowing costs and put pressure on its interest expenditure, potentially squeezing fiscal flexibility, according to experts. Yield on the 10-year benchmark government bond rose to 7.474 per cent on October 23 from 7.193 per cent on October 6, increasing about 28 basis points, according to data compiled by PTI. The rise in yields has been driven by elevated crude oil prices, a spike in global bond yields, tighter liquidity conditions in the Indian banking system and expectations of more interest rate hikes by the RBI, market experts said. "If yields remain elevated, the cost of financing the fiscal deficit will rise, adding pressure on interest expenditure and fiscal flexibility," said V Ramachandra Reddy, head of treasury at Karur Vysya Bank. He said the approximately 30-basis-point rise in government securities yields since the ...

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