Bond Yields Spike Briefly On PM’s Announcement Of Economic Package

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Bond Yields Spike Briefly On PM's Announcement Of Economic Package

The bond markets spiked briefly in morning trade

India’s benchmark bond yield spiked briefly on Wednesday morning following PM Modi’s announcement made on Tuesday about a Rs 20 lakh crore economic package amid the coronavirus pandemic. The bond yields however, retraced most of the losses due to the absence of details on the package, news agency Reuters reported. PM Modi, on Tuesday, said that India would provide Rs 20 lakh crore in fiscal and monetary measures to support an economy battered by a sweeping weeks-long lockdown to fight the novel coronavirus. He also added that the amount includes the previous package announced by the government worth Rs 1.7 lakh crore, and the steps taken by the Reserve Bank of India (RBI), to infuse liquidity in the markets.

The benchmark 10-year bond yield opened 12 basis points (bps), or 0.12 percent higher at 6.28 percent but retreated quickly to trade flat on the day by 10:15 am.

Speaking to Reuters, traders said market positioning was light and shorting bonds was not working amid a lack of details on the economic package. Yields are expected to hold in a tight range ahead of the finance minister’s press conference at 4 pm on Wednesday which is expected to throw more light on specifics of the stimulus package.

Meanwhile, the equity markets too reacted positive on Wednesday, buoyed by the announcement. However, in the afternoon session it trimmed nearly half of the gains it made in early trading. The benchmark BSE Sensex surged up to the intra-day high of 32,845.48, a jump of nearly 1,500 points from previous closing mark, within the initial few minutes of trading. At 1:22 pm, the index was trading at 32,009, up 637.88 points.

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