November nip

The yield on the new 10-year benchmark government security (G-sec; 7.18% GS 2033) opened at 7.36% in November and closed at 7.28%, down seven basis points (bps) from its October close of 7.35% and within CRISIL’s forecast range of 7.26-7.36%.

The first week saw bonds trading largely with a positive bias, tracking the decline in the US Treasury yields, which edged down amid lower-than-the-expected federal borrowings programme. Government securities (G-secs) worth Rs ~1.1 lakh crore maturing in November led to a surplus in systemic liquidity. The domestic 10-year benchmark yield closed the first week at 7.31%.

In the second week, G-secs continued their positive bias supported by favourable global cues. Treasury yields declined due to weaker-than-expected payrolls data. Global crude oil prices ranged lower amid sluggish demand from China, headwinds for the global economy, and prospect of higher-for-longer interest rates in the US. Thedomestic 10-year benchmark yield closed at 7.28%.

During the third week, G-secs traded with a positive bias tracking the decline in Treasury yields amid softer-thanexpected US inflation print. The Consumer Price Index (CPI) inflation for October 2023 printed at 4.9%, compared with 5.0% in September. Further, better-than-expected cut-off prices at the weekly auction supported market sentiment and the 10-year benchmark G-sec yield ended the week at 7.25%.

In the fourth week, G-sec yields rose tracking Treasurys. The possibility of an open market operation announcement also weighed on sentiment.

The expectation of liquidity-curtailing measures - given G-secs worth Rs ~79,000 crore are maturing in December - led to a slight selloff in G-secs, and the 10-year yield ended the month at 7.28%.