Spike in govt bond yield temporary, may soften soon: Chidambaram

Mumbai: Finance Minister P Chidambaram today expressed optimism that the spike in government bond yields will come down soon as he feels the recent rally in temporary.

“No one is comfortable paying a higher interest rate. Interest rates (yields) on government bonds have risen temporarily but we hope some measures the Reserve Bank will take, and when the next set of inflation figures come…and if it moderates, it is possible that the yields will move down,” Chidambaram told reporters in Mumbai.[caption id=“attachment_1238867” align=“alignleft” width=“380”] Finance Minister P Chidambaram. Image courtesy PIB[/caption]

Yield on the benchmark 10-year government bonds breached the 9 percent-mark for the first time in over two months on 11 November tracking the fall in the rupee and on concerns over early withdrawal of easy money policy by the US Fed.

Following this, the rupee fell 77 paise to end near two-month low of 63.24 against the US currency on 11 November.

Following the spike in yields, the Reserve Bank Governor Raghuram Rajan on 13 November, had announced some measures including to conduct an open market operation, which gave some respite to the market and the yields eased to 8.92 percent.

However, the 10-year yield rose above 9 percent on 14 November after headline inflation quickened to an eight month high at 7 percent in October as against 6.46 percent in the previous month.

However, today, the yield on 10-year government security ended at 9 percent.

“Remember, with higher inflation about a year ago, the government security rate was 8 per cent,” the finance minister said.

“The (RBI) Governor and I discussed it today (higher yields on government bonds), we discussed it even today, but we hope that this will moderate in the near future,” Chidambaram said.

PTI