Bonds, rupee stage strong rebound on poll outlook
Government bond yields closed at their lowest levels in more than two years, and the rupee logged its largest single-day gain since December, as exit polls predicted a strong victory for the ruling National Democratic Alliance (NDA) in the general elections, kindling expectations of policy continuity.
Yield on the 10-year benchmark government ended the day's trade at 6.9438%, its lowest closing level since April 7, 2022, LSEG data showed. The bond had closed at 6.9860% on Friday. Bond prices and yields move inversely. A fall in government bond yields makes it cheaper for companies to raise funds through debt as sovereign bond yields are the pricing benchmarks for corporate debt.
The rupee closed at 83.14 per US dollar versus 83.4625 per dollar at the previous close, the data showed. Currency traders said Monday's 0.38% appreciation versus the US dollar was the largest single-day gain since Dec 15, 2023.
«The main reason for bond prices to go up is the anticipation of stability and policy continuity. If the majority is strong, that makes a case for the government to use the huge dividend payout it has received from the Reserve Bank of India for further adherence to fiscal consolidation, which brings with it the possibility of lower market borrowing,» said Naveen Singh, head of trading at ICICI Securities Primary Dealership.
Last month, the RBI transferred a record-high surplus of ₹2.11 lakh crore to the government, more than double the amount that the government had budgeted as dividend from the central bank and
