Bond yield at 8-month low on higher demand

MUMBAI: Indian benchmark government bond yield, which moves inversely to prices, fell to near 8-month low as overseas investors and domestic institutions like insurers and banks extended their buying spree, believing that a clear inflation fight could take bond yields further down in years to come.

The benchmark yield on Friday closed at 8.51 per cent, down two basis points from its previous close at 8.53 per cent. A basis point is 0.01 per cent. However, it has dipped 59 bps or 6.48 percentage points since April 7 this year, when it had closed at a high of 9.10 per cent.

"Overseas investors drew confidence from three factors: a stable government, steady/appreciating rupee and receding threat of India's rating downgrade," said Badrish Kolhalli, fund manager - fixed income, HDFC Life Insurance.

"Earlier, they were wary of investing. The flow would continue to fetch more funds for some time."