Bond yields dip as Sitharaman sticks to 4.4% fiscal deficit
India's government bonds saw a lift on Tuesday after Finance Minister Nirmala Sitharaman stuck to the 4.4% fiscal deficit target for this financial year and ruled out any extra borrowing.
This move reassured investors, leading the 10-year bond yield to dip slightly—from 6.4651% to 6.4503%.
In simple terms: when investors feel confident, bond prices go up and yields drop.
Market players are adjusting their strategies
With the government holding firm on its borrowing plans, market players are rethinking their strategies—some are urging a reduction in the share of ultra-long bonds in the supply schedule.
Mitul Kotecha from Barclays notes this could help narrow yield differences across bonds of various lengths.
Meanwhile, everyone's watching inflation data from both India and the US for hints on what might come next.
Even short-term rates (overnight index swaps) dipped a bit, showing that worries about government overspending have eased for now.