Top-rated Corporate Bond Yields

You can expect to get yield of nearly 10% for AAA rated bonds maturing over the next two years. Bonds with lower than AAA rating will give approximately 11% yield to maturity (YTM). The bond yields may increase due to hike in the repo rate by 25bps (basis points) to 8% by Reserve Bank of India (RBI) on 27th January.

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10-Year G-Sec Benchmark Yield

The yield on 10-year benchmark government securities (G-Secs), which sets the tone of the fixed-income market, was at 8.52% on 20th January and has risen 25bps to 8.77% on 27th January. RBI’s move to hike the repo rate by 25bps took the markets by surprise. Banks may increase their lending rates which mean higher EMIs (equated monthly instalments) on personal loans. According to Nomura, “The RBI hiked repo rate for two reasons: 1) Even though vegetable prices have moderated, CPI inflation remains above 9% and core CPI inflation has remained sticky at around 8%; and 2) the RBI governor has formally accepted the recommendations of the Urjit Patel committee, which targets CPI inflation below 8% by January 2015 and below 6% by January 2016. In absence of any policy responses, there would be upside risks to these targets.”

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Fortnightly Market View: Rose-tinted View

One more instance of how stock market-players are usually weak on understanding macroeconomic...

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