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    Rating upgrade fires up bond market, yield dips

    Synopsis

    The benchmark government bond yield shot up 12 basis points to open at 6.94% Friday.

    ET Bureau
    The bond market has fired up Friday morning after global rating company Moody’s upgraded India’s sovereign rating by one notch lifting investor’s confidence on the country’s economic health.

    The benchmark government bond yield plunged 12 basis points to open at 6.94% Friday. Bond yield and price move in opposite directions.

    “The rating revision will boost the market sentiment sending yields lower,” said Sandeep Bagla, associate director, Trust Capital. “But, other factors like fiscal overshooting, global yields rise across emerging markets need to be taken into account as well. Overseas investors too will be encouraged to stay invested in India.

    At 10:10hours the benchmark is yielding at 9.96% with many traders buying in short covering.

    Earlier, they short-sold the 10-year paper amid expectation of rising yields. With reversing the trend, those bond houses, foreign banks are likely to have incurred losses.

    “India bond market will show strength next few days as a rating upgrade always boost investor confidence,” said Naveen Singh, senior vice-president at ICICI Securities Primary Dealers. “Some short sellers have already incurred losses with sudden change in yield movement.”

    “But, people are not so keen taking fresh long positions as select uncertain factors like global yield rise or domestic fiscal concerns need to be watched closely,” he said.

    The yield dip is also unlikely to nudge the Reserve Bank of India to cut the policy rate, dealers said.

    Moody’s has upgraded the rating to Baa2 from Baa3, the lowest in investment grade. It has changed the outlook on the rating to stable from positive.

    “The government is mid-way through a wide-ranging program of economic and institutional reforms, it” said in a note.

    “While a number of important reforms remain at the design phase, Moody's believes that those implemented to date will advance the government's objective of improving the business climate, enhancing productivity, stimulating foreign and domestic investment, and ultimately fostering strong and sustainable growth.”

    The benchmark government bond yield shot up 12 basis points to open at 6.94% Friday. Bond yield and price move in opposite directions.

    “The rating revision will boost the market sentiment sending yields lower,” said Sandeep Bagla, associate director, Trust Capital. “But, other factors like fiscal overshooting, global yields rise across emerging markets need to be taken into account as well. Overseas investors too will be encouraged to stay invested in India.

    At 10:10 hours the benchmark is yielding at 9.96% with many traders buying in short covering.

    Earlier, they short-sold the 10-year paper amid expectation of rising yields. With reversing the trend, those bond houses, foreign banks are likely to have incurred losses.

    “India bond market will show strength next few days as a rating upgrade always boost investor confidence,” said Naveen Singh, senior vice-president at ICICI Securities Primary Dealers. “Some short sellers have already incurred losses with sudden change in yield movement.”

    “But, people are not so keen taking fresh long positions as select uncertain factors like global yield rise or domestic fiscal concerns need to be watched closely,” he said.

    The yield dip is also unlikely to nudge the Reserve Bank of India to cut the policy rate, dealers said.

    Moody’s has upgraded the rating to Baa2 from Baa3, the lowest in investment grade. It has changed the outlook on the rating to stable from positive.

    “The government is mid-way through a wide-ranging program of economic and institutional reforms, it” said in a note.

    “While a number of important reforms remain at the design phase, Moody's believes that those implemented to date will advance the government's objective of improving the business climate, enhancing productivity, stimulating foreign and domestic investment, and ultimately fostering strong and sustainable growth.”




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    (What's moving Sensex and Nifty Track latest market news, stock tips and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .)

    Download The Economic Times News App to get Daily Market Updates & Live Business News.

    Subscribe to The Economic Times Prime and read the Economic Times ePaper Online.and Sensex Today.

    Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price

    ...more
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