Bond Yield Falls under 6% on RBI Proposal to buy ADDITIONAL G-SECS;

The RBI’s decision on Wednesday to step up purchase of government securities (G-Secs) under the G-SAP led to the yield on the benchmark 10-year bond falling below 6 percent. This signals that the market expects the Reserve Bank of India(RBI) to ensure that interest rate in the economy will continue to be moderate in order to help support economic activity and the elevated borrowing programme of the government.
The RBI decision to buy Rs 35,000 crore worth of bonds in May would help the market in absorbing a portion of the Rs1.16lakh crore of market borrowings by government during the month. The yield on the 10-year benchmark 5.85%, 2030 bond fell by 0.62 percent and closed below the psychological 6% at 5.978% on Wednesday from 6.01% the previous day. The 10-year G-Sec has closed under 6% for the first time in nearly three months.
In April, the RBI launched the G-Sec secondary market acquisition programme under which it said it will buy Rs 1 lakh crore worth of bonds in the April June quarter. It has so for bought Rs 25,000 crore worth of G-Secs.

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