Foreign Banks, PDs Sell Over Rs 20,000 Crore Worth Of Gilts On Rising Tensions Between India-Pakistan
This selling also drove the yield on the 10-year benchmark government bond up by six basis points to 6.40%, the highest closing level since April 15.
Growing worries of war between India and Pakistan led foreign banks and primary dealerships to offload Indian government bonds worth Rs 20,510 crore on Thursday, according to data by Clearing Corporation of India Limited.
This selling also drove the yield on the 10-year benchmark government bond up by six basis points to 6.40%, the highest closing level since April 15.
During the beginning of the trading session, yields had fallen as traders expected the tension between India and Pakistan to ease. However, reports of further escalation of a likely war between the two nations and a fall in the Indian rupee spooked investors, a treasury banker said.
Mutual funds also sold government bonds worth Rs 51 crore, while public and private sector banks bought gilts worth Rs 16,068 crore and Rs 960 crore, CCIL data showed.
Meanwhile, the Indian rupee ended at 85.72 to the dollar, more than 1% lower than the dollar. On Wednesday, it was at 84.83 a dollar.
The Indian government said that armed forces targeted air defence radars and systems in Pakistan on Thursday morning, while Pakistan's military said it had shot down 25 Indian drones.
This has come after the Indian government announced that Indian armed forces on early Wednesday launched Operation Sindoor, hitting terrorist infrastructure in Pakistan and Pakistan-occupied Jammu and Kashmir.
Tensions have been on the rise between the two countries since the attacks on Indian tourists in Kashmir last month.
"Elevated geopolitical concerns with Pakistan may lead to price disruption, so the market is cautious. There is spillover from equity markets as well. Earlier there were hopes of further rate cuts, but with these rising tensions we don't know – RBI may not cut rates sharply," Soumyajit Niyogi, Director at India Ratings and Research, said.
Market participants expect the 10-year government bond yield to rise further to around 6.43-6.45% if there is further military action between the two countries.
