RBI Hikes Repo Rate by 25 Bps; Bond Yields Rise
By ThePip Desk
RBI increases the repo rate by 25 basis points to 5.50% to combat rising inflation, causing 10-year and 5-year government bond yields to trade higher.
Bond yields traded higher on Wednesday following the Reserve Bank of India Monetary Policy Committee decision to increase the policy repo rate under the liquidity adjustment facility by 25 basis points to 5.50 per cent. The central bank implemented this hike in a bid to tame rising inflation amid the continuing West Asia crisis.
How Key Bond Yields Moved on Wednesday
Domestic debt instruments reacted immediately to the central bank policy shift with noticeable upward movements across benchmarks. The shifts recorded in major government stocks highlight the immediate market response:
The yields on new 10-year Government Stock were trading 3 basis points higher at 7.22% from its previous close of 7.19% on Tuesday.
The benchmark five-year interest rates were trading 2 basis points higher at 6.99% from its previous close of 6.97% on Tuesday.
Global Market Movements and Commodity Pressures
International factors provided a mixed backdrop for domestic trading sessions as global yields and commodities fluctuated. External markets displayed specific trends leading up to the domestic policy announcement:
U.S. Treasury yields were lower on Tuesday as a surge easing to multi-decade highs took a pause.
Oil prices hovered just above the flatline on Wednesday as investors weighed ongoing threats to Gulf crude flows against recent indications that supplies out of the region are improving.