You can expect to get yield of over 10% for AAA rated bonds maturing in the next couple of years. Bonds with lower than AAA rating will give near 11% yield-to-maturity. With RBI not hiking the repo rate, the bond yields should remain steady, in the near term.
G-Sec yields for different maturities have risen since the past fortnight. You can expect to get yield-to-maturity of 9.28% for bonds maturing in the next 15 to 30 years. Bank FD rates are offered at similar rates for terms of one to 10 years.
10-year benchmark government security (G-Sec) yield, which sets the tone of the fixed-income market, was over 9% a month ago and was at 8.9% on 17th December even though it fell to 8.7% on 27th November. RBI did not raise benchmark rates, despite higher inflation rate in November. RBI hopes that retail prices will ease and expressed concerns about decelerating GDP growth. The market was expecting RBI to increase the repo rate by 25bps (basis points), but it opted to keep the bank rate unchanged at 7.75%. According to Nomura’s research report, “We expect cumulative hikes of 50bps to the repo rate in H1 2014, taking it to 8.25%.” G-Sec yields should remain at the current level of below 9%, in the short term.
The consumer price index (CPI) increased from 10.05% to 11.24% in November while wholesale price index (WPI) escalated to 7.52% compared to 7% in October. Future RBI policy direction will be guided by the outlook on CPI inflation.