Fear over the City: India bond yield at 20-month low

MUMBAI: “It was the best of times, it was the worst of times,” the novelist, writing one of the most seminal books of his life, said about the state of the world more than 150 years ago. The global economic situation in the latter half of 2019 also couldn't have been described better. Growth is slowing but still strong. Trade tensions are rising and valuations are keeping investors on tenterhooks. But inflation is soft and oil prices are down. And interest rates, going by central bank’s statements and market action on Tuesday, seem set to go down and stay down as investors prepare for a possible recession.

From Tokyo to Toronto, bond yields are headed pronouncedly south and Mumbai Tuesday was in lockstep with the global trend, with returns on the 10-year benchmark sovereign debt sliding to a 20-month low.



The likelihood that a key panel deciding the fate of the central bank’s surplus reserves would recommend recapitalisation of state-owned lenders caused bond prices to rally to 6.81 per cent. In Europe’s richer neighbourhoods, bonds in Sweden, Austria, and Germany were yielding negative returns. The benchmark US Treasury is also yielding 2.03 per cent, versus 2.42 per cent about a year ago.

“A combination of global and domestic factors sent the benchmark yield to a new low,” said Shailendra Jhingan, managing director at ICICI Securities Primary Dealership. “Still, this yield would attract global investors as many countries are yielding zero or negative. Slowing global economic activity may continue to weigh on domestic yields.”
Crude oil prices have remained stable despite political tension, pointing to a likely slowdown in global economic activity and demand for auto fuels.