Moneycontrol
Nov 14, 2017 12:08 PM IST | Source: CNBC-TV18

See 10-year bond yields by March-end at 7%; may spike a bit near-term: Deutshe Bank

The bank's forecast for ten-year bond yields at end of fiscal is still at 7 percent, said Sameer Goel of Deutsche Bank.

CNBC TV18 @moneycontrolcom

The ten-year bond yields were above the 7 percent mark and know the outlook for the bond market from here on, CNBC-TV18 spoke to Sameer Goel of Deutsche Bank.

He said the higher yield trend is not singular to India but yesterday's inflation imprint has added to certain concerns on whether the RBI can ease policy rates, there are also residual concerns about what the bank recapitalization process will mean in terms of technical for the bond market and even the global backdrop. So all this adding up and usually, towards end of the year markets tend to get illiquid, so that is a bit of a concern.

So this risk is not only for India but for markets in general, the volatility will rise and price action will be exaggerated, said Goel.

One of the concerns for the market is if there will be extra borrowings by the government in preparation for fiscal deficit. Goel said it is always tough when there is uptrend in yields to really distinguish whether an additional borrowing is in the price or not. However, it is very much on expected line that market is expecting some sort of slippage given the trends seen in disinvestment, additional money to be paid for bank recapitalization etc.

One would be surprised if there was announcement that there is no additional borrowing, he said.

Given that the global environment is perched for still higher yields, we could also go up from 7 percent to 7.15-7.20 percent. However, the forecast of the bank for ten-year bond yields, for end of fiscal is still at 7 percent, said Goel.
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