Bonds prices dip ahead of RBI Guv appointment

MUMBAI: Bond yields have risen pushing prices down in the afternoon trade Thursday with uncertainties looming large over the appointment of a new RBI governor and heightened inflation pressure.

Both the factors could well pour cold water on faster rate-cut hopes as the debt market is apprehensive of a hawkish monetary policy stance in future.

At 14:30 hours the benchmark bond yield increased four basis points to trade at 7.14 per cent versus 7.10 per cent closed on Wednesday.

“Some investors rushed to exit Gsec holdings amid uncertainties,”said Debashis Mitra, dealer fixed income and money market at SBI DFHI primary dealership. “They have mostly booked profits as they entered at a higher (yield) level. Chances of further rate cuts are dimming now.”

Mutual funds and banks, which had bought the sovereign securities in the range of 7.20-7.30 per cent, have turned jittery after inflation gauges showed uptick in prices, and the government looked set to announce a new governor, dealers said. They have rushed to book profits.

The incumbent governor Raghuram Rajan will demit office on September first week.

The wholesale price inflation accelerated to a 23-month high of 3.6 per cent in July while the retail inflation (consumer price index) rose at a faster-than-expected pace to 6.07 per cent from a year ago.

ET reported, Prime Minister Narendra Modi and Finance Minister Arun Jaitley are expected to meet on Thursday to decide on Rajan's successor.

Former RBI deputy governor Subir Gokarn, deputy governor Urijit Patel, chief economic advisor Arvind Subramanian, Niti Aayog deputy chairman Arvind Panagariya, SBI chairman Arundhati Bhattacharya, economic affairs secretary Shaktikanta Das are some of the names that have been doing the rounds.