One-yr, 10-yr yield curve briefly inverts India’s 1-year government debt yield rose higher than that of the 10-year note on Wednesday, following higher than expected cut-offs of the Reserve Bank of India’s (RBI) treasury bills sale. The RBI sold 364-day notes at 7.48% yield, the highest since October 2018. The cut-off at the 1-year T-bill at auction was higher than the 10-year bond yield. The 7.26%, 2032 bond’s highest yield on Wednesday was 7.47%. The 1-year note last traded above the 10-year bond in May 2015. Also read: NCDEX to relaunch groundnut futures trade soon “At any rate, this theory may not be relevant in India as the curve here refers to the sovereign yields and not the corporate bond yields though the latter are linked to the former. But the secondary market is relatively thin and may not reflect investment intentions of industry,” Sabnavis said. “The market believes now that the RBI will also increase rates now. Data on inflation to be released on Monday will be crucial and markets will remain edgy till then,” added Sabnavis.
Liz Truss, who took over as Britain’s prime minister on Tuesday, vowed immediate action to help the economy, which faces double-digit inflation and an expected lengthy recession.
Showing correlation with mainstream financial markets, cryptocurrency bitcoin fell to its lowest since mid-June and the market cap of all cryptocurrencies dropped below $1 trillion, according to data provider CoinGecko.
The Bank of Canada is expected to announce a large rate hike later on Wednesday as it battles to curb inflation at its highest in nearly four decades.
(Siddharth Srivastava is Head – ETF Product, Mirae Asset Mutual Fund. The views expressed in the article are of the author and do not reflect the official position or policy of FinancialExpress.com.)