Rating upgrade fires up bond market, yield dips

Rating upgrade fires up bond market, yield dips thumbnail
The bond market has fired up Friday morning after global rating company Moody’s upgraded India’s sovereign rating by one notch lifting investor’s confidence on the country’s economic health.

The benchmark government bond yield plunged 12 basis points to open at 6.94% Friday. Bond yield and price move in opposite directions.

“The rating revision will boost the market sentiment sending yields lower,” said Sandeep Bagla, associate director, Trust Capital. “But, other factors like fiscal overshooting, global yields rise across emerging markets need to be taken into account as well. Overseas investors too will be encouraged to stay invested in India.

At 10:10hours the benchmark is yielding at 9.96% with many traders buying in short covering.

Earlier, they short-sold the 10-year paper amid expectation of rising yields. With reversing the trend, those bond houses, foreign banks are likely to have incurred losses.

“India bond market will show strength next few days as a rating upgrade always boost investor confidence,” said Naveen Singh, senior vice-president at ICICI Securities Primary Dealers. “Some short sellers have already incurred losses with sudden change in yield movement.”

“But, people are not so keen taking fresh long positions as select uncertain factors like global yield rise or domestic fiscal concerns need to be watched closely,” he said.

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