PSU Banks Gain as Bond Yields Fall to a 4-Month Low

The National Stock Exchange's index for public sector banks gained nearly 1.3 per cent today as bond yields fell to a four month low.

The yield on 8.83 per cent bond maturing November 2023 ended at 8.53 per cent the lowest since January 21. Bond yields rose following signals from the Reserve Bank of India at its monetary policy early this week that the central bank may reduce rates if inflation eases faster than currently anticipated.

Rising liquidity condition and a renewal of FII buying into the bond markets has also led to stronger demand for bonds from local and foreign investors.

Analysts say public lenders are likely to have higher treasury gains due to mark-to-mark profit on bonds as they hold higher portion of government bond in their portfolio.

As of 10.15 a.m. Corporation Bank traded 2.73 per cent higher at Rs 398.30 whereas SBI and Syndicate Bank traded 1.25 per cent higher each.