How Viral Acharya's presence moved bond market

MUMBAI: The benchmark bond yield shot up eight basis points amid swirling speculation in the debt market over RBI’s future policy action.
The sovereign bond yield Monday surged to 6.88%, the highest level in the past five weeks. It has jumped about 40 basis point since the end of July.

The Reserve Bank of India deputy governor Viral Acharya is believed to have met a group of institutional investors and money managers in Mumbai as Deutsche Bank has facilitated such gathering.

Deutsche Bank could not be contacted immediately while an email sent to RBI at a short notice, remained unanswered until the publication of this report.

“RBI still does not call it a victory for inflation while the central bank looks fine with a rise in bond yields if credit growth picks up and US Treasury yields rise further,” said a market participant with knowledge of the matter.

“People, who participated in that deal are now inclined to believe that the cycle of monetary easing is over.”

Moreover, the central bank has announced an open market operation through which it will sell government securities worth of Rs 10,000 crore on November 09.This move was too unexpected adding to supply side pressure, dealers said.

“There were enough hints that monetary policy cannot be easy when your fiscal policy is lose,” said another person aware of the gather.
Ten-year US Treasury yields too have risen sharply as high as 2.4% with President Donald Trump’s choice to head the Federal Reserve due any day. It rose about 30-40 basis points in the past few weeks.