India’s 1-year government debt yield rose higher than that of the 10-year note on Wednesday, following higher than expected cut-offs of the Reserve Bank of India’s (RBI) treasury bills sale.
The RBI sold 364-day notes at 7.48% yield, the highest since October 2018. The cut-off at the 1-year T-bill at auction was higher than the 10-year bond yield. The 7.26%, 2032 bond’s highest yield on Wednesday was 7.47%. The 1-year note last traded above the 10-year bond in May 2015.
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“At any rate, this theory may not be relevant in India as the curve here refers to the sovereign yields and not the corporate bond yields though the latter are linked to the former. But the secondary market is relatively thin and may not reflect investment intentions of industry,” Sabnavis said.
“The market believes now that the RBI will also increase rates now. Data on inflation to be released on Monday will be crucial and markets will remain edgy till then,” added Sabnavis.