The Indian bond market is on a roller-coaster ride. The yield on 10-year government bonds has hardened after the government announced the huge borrowing programme for fiscal year 2022 in the Union Budget 2021.
Bond market cues often reflect in equity markets. After a bull run, the stock market has corrected in recent days, with both the Sensex and the Nifty falling from record highs. What is happening in the domestic bond market and what are its implications? Let’s take a look.
First of all, what is bond yield?
It is the annual return ones gets on a bond. Bond yield and prices move in opposite directions. The government is the biggest issuer of bonds. It issues bonds to raise money to fund expenditure. So, when yields go up, the borrowing cost of the government goes up.