10-year bond yield falls to 7% on HDFC Bank mop-up – Times of India

MUMBAI: The yield on the benchmark 10-year government bond fell to 7% on Wednesday, the lowest in over a year. Rupee Also strengthened against the dollar, which weakened against other currencies global market, The rupee closed at 81.83, up 5 paise from Tuesday’s closing price of 81.88. Dealers said the domestic unit would have benefited more had the RBI not been buying dollars through public sector banks.
In G-Sec, there was heavy buying of 10-year bond (7.26% 2033) HDFC bank, which has been building its portfolio of government bonds ahead of its merger with parent HDFC. RBI has not exempted the bank from meeting the reserve requirement after the merger.
Banks are required to maintain 18% of their deposits in government bonds as part of their Statutory Liquidity Ratio (SLR) requirement. currently, HDFC Not subject to this rule, and post merger HDFC Bank will have to maintain SLR on its extended liabilities.
Another reason for the decline in the yield on the 10-year bond was speculation that the US Fed might hold off on its rate hikes. The fall of the dollar also helped lower the yield as the RBI was buying dollars and releasing liquidity into the banking system. If yields stay low, banks could end up with treasury profits in the first quarter.