Yields of Government Securities (G-Secs) thawed on Wednesday as the monetary policy committee (MPC) changed the policy stance to “neutral” from “withdrawal of accommodation” and FTSE Russell said it will include these securities in its Emerging Markets Government Bond Index (EMGBI).
Yield of the benchmark 10-year G-Sec (coupon rate: 7.10 per cent) softened 4 basis points to close at 6.77 per cent from previous close of 6.81 per cent. Price of this bond rose about 26 paise.
“The MPC held rates as expected but changed the stance to neutral (in line with market expectations) – driving yields to fall quickly. Some profit booking was seen in the afternoon session….,” Nuvama Wealth said in a report.
V Rama Chandra Reddy, Head-Treasury, Karur Vysya Bank, observed that the MPC kept the repo rate unchanged and adopted a neutral policy stance, aligning with the prevailing liquidity conditions and offering flexibility for future rate adjustments based on economic conditions.
“While inflationary pressures and geopolitical uncertainties are being monitored, the RBI is cautious not to stifle economic growth. This balanced approach allows for manoeuvrability in future monetary decisions.
“Bond yields remain positive, driven by continuous FII inflows and favourable demand-supply dynamics, with 10-year yields expected to reach 6.60 per cent by fiscal year-end, supported by rate cut expectations,” he said.
EMGBI inclusion
FTSE Russell, in a statement, said the Market Accessibility Level for India will be reclassified from 0 to 1, and FAR-eligible Indian government bonds will be included in the FTSE EMGBI.
“Asa result of the reclassification of India’s Market Accessibility Level from 0 to 1, Indian government bonds will be added to the EMGBI and regional Asian government bond indices over a six month-period, commencing with September 2025 index profiles.
To a question on how comfortable RBI is to allow foreign investors to hold G-Secs, MD Patra, Deputy Governor, RBI, said: “The current holding of G-Secs by foreigners is just about 3 per cent….Their holding under the various routes is very low. For instance, under the FAR (fully accessible route) route it is just about 5 per cent. So, we will wait for these numbers to get to a decent level before taking a call.”
