Indian bond yield ends 3 bps down amid short covering, FPI buying

The 10-year benchmark bond yield ended at 6.5658 percent, as compared to 6.5943 percent at open on September 2

Indian bond yields ended nearly 3 basis points (bps) down on September 2 due to short-covering by the traders, probable intervention by the Reserve Bank of India (RBI) and buying by the foreign portfolio investors (FPI) under Fully Accessible Route (FAR), experts said.

The 10-year benchmark bond yield ended at 6.5658 percent, as compared to 6.5943 percent at open on September 2, and 6.59 percent at previous close, according to the Clearing Corporation of India’s (CCIL) data.

“Continued buying from FPIs, probable intervention by RBI and short covering by traders appear to be pushing down government bond yields,” said Mataprasad Pandey, vice-president at Arete Capital Service.

Foreign investors have increased their investment in government securities under FAR by Rs 1,078.994 crore today. According to the CCIL, investment of FPI in G-sec stood at Rs 2.96 lakh crore as on September 2, as compared to Rs 2.95 lakh crore as on September 1.

Indian bond yield has been under pressure since last few weeks, especially after the announcement of the GST reforms by the government.

In the 79th Independence Day address, Prime Minister Narendra Modi promised next-generation GST reforms.

The Centre has proposed to 'essentially move towards a simple tax' with two slabs, standard and merit, with special rates applicable only to select items, the finance ministry has said.

This has raised concerns of lower revenue and may prompt the Centre to borrow more from the market through government securities, experts said.