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Bond rate dip to help government

A soft rate regime will help the government’s borrowing programme for this fiscal
There are expectations of one more interest rate reduction from the RBI, strengthened by the release of the minutes of the RBI’s monetary policy committee meeting, where the members expressed their concern over growth.
There are expectations of one more interest rate reduction from the RBI, strengthened by the release of the minutes of the RBI’s monetary policy committee meeting, where the members expressed their concern over growth.
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Our Special Correspondent   |   Mumbai   |   Published 20.06.19, 07:26 PM

Interest rates on bonds, or their yields, eased further on Thursday after the US Federal Reserve indicated interest rate cuts. Analysts expect the yields to fall further, with the Reserve Bank of India (RBI) seen to bring down interest rates yet again to kickstart growth.

A soft rate regime will help the government’s borrowing programme for this fiscal. President Ram Nath Kovind in his speech to both the houses of Parliament said the governments planned to invest a whopping Rs 25,000 lakh crore in rural development.

At the bond markets on Thursday, yields — they are inversely related to prices — on the benchmark 10-year security fell to 6.75 per cent, which was the lowest since October 2017. Domestic bond yields have been on the way down, tracking their peers in Europe and the US after the European Central Bank indicated more stimulus. At close, the yield on the 10-year bond ended at 6.79 per cent, lower than the previous close of 6.84 per cent.

There are expectations of one more interest rate reduction from the RBI, strengthened by the release of the minutes of the RBI’s monetary policy committee meeting, where the members expressed their concern over growth.

Experts pointed out that much will depend on the Union budget next month where the focus of attention will be on the fiscal deficit projection made by new finance minister Nirmala Sitharaman.

Indications given by the US central bank also had its impact on the stock markets with equity benchmark Sensex rising 489 points on Thursday, in line with the global markets.

The 30-share Sensex, after a tepid beginning, saw across-the-board buying led by banking, healthcare and auto counters. It finally settled 488.89 points, or 1.25 per cent, higher at 39601.63. the broader NSE Nifty soared 140.30 points, or 1.20 per cent, to finish at 11831.75. The rupee on Thursday surged 24 paise to close at a one-week high of 69.44 against the dollar on the back of a rally in equities and losses in the dollar after the Fed hinted at a possible rate cut in the near future.

The rupee rose to a high of 69.35 to the dollar in the day trade on the Fed’s comments that a case for a rate cut has been strengthened in view of the US-China trade war and low inflation. Euro zone government bond yields fell on Thursday, testing record lows in several cases, after the Fed opened the door to interest rate cuts. 



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