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Motilal Oswal Report
The G-Sec bond yields across different maturities have increased ~40-67 basis points since September 2021 with 10-year G-Sec yields rising ~67 bps to 6.89% (up 21 bps post the budget announcement), while the five-year/three-year/one-year G-Sec yields are up ~40-49 bps.
With sharp rise in G-sec yields, the ongoing yields now stand comparable to/higher than the pre-covid-19 levels after being in a narrow range of 5.9-6.2% over January-September 2021.
During FY21, public sector banks under our coverage reported combined treasury gains of Rs 253 billion (Rs 128 billion in H1 FY22) versus a mere Rs 34 billion in FY19 and Rs 172 billion in FY20.
However, the sharp increase in bond yields is likely to drive mark-to-margin losses for banks in the coming quarter, especially for PSBs, which hold relatively higher government securities.
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