March watch

The yield on the 10-year benchmark government security (G-sec; 7.18% GS 2033) opened March at 7.06% and closed at 7.05%, down 3 basis points (bps) from its February close of 7.08% and within CRISIL’s forecast range of 6.96-7.06%.

The opening week started on a positive note as expectations of a mid-calendar year rate cut in the US led to a decline in US Treasury yields as the week progressed; higher-than-expected GDP rate released for India led to a softening of yields. Towards the end of the week, Federal Reserve Chairman Jerome Powell hinted at a rate cutthis year, supporting market sentiments, with 10-year benchmark yield closing at 7.03%, the lowest since June 2023.

In the following week, the Reserve Bank of India (RBI) conducted a seven-day variable rate repo (VRR) auction on March 15 banks placing bets of the allotted amount with weighted average cut off at 6.65%. G-secs had opened on a positive note, backed by an overnight fall in US Treasury yields. However, as the week progressed,market participants avoided placing aggressive bets ahead of the release of inflation print for India and US. Towards the end of the week US Treasury yields hardened owing to higher-than-expected producer price inflation data print. As a result, the 10-year benchmark closed at 7.06%.

In the third week, a higher-than-indicated calendar amount of the state-development loan (SDL) auction and surge in overnight US Treasury yields led to a negative start of the domestic bond market. As the week progressed, US treasury yields edged lower after the Federal Open Market Committee (FOMC) decided to keep the rates unchanged at 5.25-5.50% for the fifth consecutive meeting. The 10-year benchmark closed at 7.05%.

In the last week, yields opened on a negative note due to a rise crude oil prices and a sharp fall in the rupee. The RBI conducted a six-day VRR auction on 27 March 2024 of Rs 75000 crore. At the end of the week, bond prices increased due to lower-than-expected borrowings in the first half of fiscal 2025. The 10-year benchmarkpaper closed the month at 7.05%.