Mumbai: Bonds took a sigh of relief on Monday as the Finance Ministry signalled that the sovereign overseas bond issue is still on the review table and the central bank should deliver a steep rate cut in its August policy to boost economic growth.
Sovereign bond rallied on Monday with the benchmark 10-year security dropping nine basis points to 6.43 per cent.
"I am not doing any review (on the sovereign international bond). I have not been asked by anybody to do a review" Finance Minister Nirmala Sitharaman said in an interview to a newspaper.
Speaking ahead of the Reserve Bank of India's August 7 policy decision, Sitharaman said, "I'll honestly wish (for a) rate cut ... and yes, a significant rate cut would do a lot of good for the country."
"I am conscious that the RBI has taken very accommodative posture and done nearly...75 basis points (rate cut). We will now have to look at that route with a lot more hope. The industry also feels there is space for it," the Finance Minister said.
Madhavi Arora, Economist, Forex and Rates, Edelweiss Securities, said, "Going forward, the demand-supply dynamics are extremely favourable for G-sec in the second half (H2) of FY20. Combined with possibly deeper rate cuts, the G-sec could comfortably continue in the months to come."
Bond yields had risen sharply last week on news reports that the Prime Minister’s Office (PMO) was reassessing the idea of issuing foreign currency overseas sovereign bonds. Reports said that the PMO had asked the finance ministry to seek wider consultation from stakeholders before proceeding with any plans.
In recent interviews, RBI Governor Shaktikanta Das had highlighted the lack of transmission and said future cuts depend on data points, particularly inflation.
After opening flat at 68.94, the rupee was seen trading on an appreciating note against the dollar. The domestic currency ended the session at the highest point of the day at 68.73. Positive Asian currencies, lower crude oil prices and buying in the domestic bond market backed the home currency....