scorecardresearchBond yields little changed, BOJ tweak hurts sentiment

Bond yields little changed, BOJ tweak hurts sentiment

Updated: 20 Dec 2022, 05:15 PM IST
TL;DR.
  • The benchmark 10-year yield ended at 7.2991%, after ending at 7.2980% on Monday.
The benchmark 10-year yield ended at 7.2991%, after ending at 7.2980% on Monday.

The benchmark 10-year yield ended at 7.2991%, after ending at 7.2980% on Monday.

(Reuters) - Indian government bond yields were off highs to end little changed on Tuesday, even as sentiment weakened after the Bank of Japan (BOJ) tweaked its yield curve control (YCC) strategy, while rising U.S. yields also weighed on appetite.

The benchmark 10-year yield ended at 7.2991%, after ending at 7.2980% on Monday.

"There was some gap-up opening in terms of yields after the BoJ's decision, but since yield was near the upper end of the trading range, it recovered from those levels," said Naveen Singh, head of trading at ICICI Securities Primary Dealership.

"The benchmark bond yield is expected to remain in the 7.20%-7.35% range for the remainder of December. Even in January, I do not expect any major breakout."

Meanwhile, some traders stepped up their purchases as 7.32%-7.33% levels on the benchmark paper seemed lucrative. This was a fair level for book building as any further upside is seen limited and buying pushed yields off highs, a trader with a private bank said.

Earlier in the day, the BOJ said it will allow the 10-year bond yield to move 50 basis points (bps) on either side of its 0% target, wider than the previous 25-bps band.

Japan's central bank said the policy board decided unanimously to review its YCC strategy, which pins short-term yields at -0.1% and the long-term yield at around zero, amid a decline in market function.

U.S. Treasury prices slumped after the announcement, with the 10-year yield rising to a three-week high of 3.71%.

U.S. yields are also higher as market participants await more hikes from the Federal Reserve in 2023, with the interest rate expected to go above 5%.

The Reserve Bank of India, which has raised rates by 225 bps in 2022, is expected to opt for one more in February as core inflation stays stuck, economists said.

 

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First Published: 20 Dec 2022, 05:15 PM IST