New 10Y bond heading to 9% handle

The Economics affairs secretary just made a press statement that Indian Government will conduct the much feared "Debt-Switch" programme in the market and not with RBI as was previously expected by the market considering the high yield levels.

This practically means INR 50000 Cr of debt supply to the market at a time when there is little interest in the secondary market; even PFs are opting for the yield pick-up from Corporate bonds and State Development loans post the recent change in investment pattern norms.

Even if Government buys back G-Secs maturing in 2015, 2016 and 2017 and issues, say, 15Y papers, the net duration in the market is going to raise sharply. All set for 9% mark even in the new 10Y bond in few trading sessions from now.


Reuters link

10Y yield above 9% - Investors to come in next?

There have been quite a few calls on TV in the last couple of days about shifting of assets from Equities to Debt. It is not counter intuitive given the fact 10Y GoI Security had found itself only few times above 9% in the last 10 years. Though past data could be insufficient to explain future price action, it need not be completely ignored.

Following is the histogram of 10Y yield on closing basis:

  

With Current 10Y yield at 9.05% (1.4% event in last 10Y), it is only natural to see longer term investors coming into the market. Hopefully.