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Wednesday, February 6, 2013

Bond yields are inversely related to bond prices. And 10 year government bonds are increasingly preferred by investors when volatility persists in other asset classes. During such times, demand for bonds and therefore the price increases and the yield falls down. But just recently, India's benchmark 10-year bond yield edged up 0.1% to 7.93%. This was because global crude oil prices resumed their upward trend. And also because some positive economic data emerged from the US coupled with strong corporate earnings. Meaning that there was probably lesser demand for bonds pushing up the yield. The government intends to sell Rs 120 bn of bonds, including Rs 60 bn of the benchmark paper in February. Thus, yields remaining on the higher side could very well be likely. 

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