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India's 10-year G-Sec yields briefly spiked to 7%
India's 10-year G-Sec yields briefly spiked to 7% on April 10 following RBI's announcement of a $2.15B seven-day variable rate reverse repo (VRRR) auction.
The RBI's $2.15B VRRR auction created temporary volatility in India's bond market on April 10, with 10-year G-Sec yields briefly touching 7% before closing at 6.91%, down 5 basis points from the previous close of 6.96%. The auction's surprise announcement initially pushed yields higher as markets hadn't anticipated a liquidity squeeze amid the West Asia crisis. However, strong participation from banks and PSUs, who bid $2.25B for better returns than TREPS alternatives, demonstrated confidence in system liquidity adequacy. The cut-off rate settled at 5.24% with a weighted average of 5.23%. IDFC First Bank's Gaura Sengupta clarified the VRRR aims to keep the weighted average call rate within the repo-SDF band, not signal monetary tightening. Shinhan Bank's Kunal Sodhani noted banks bid aggressively as VRRR offered superior returns compared to other short-term avenues, confirming market confidence despite temporary liquidity management measures during an exceptionally liquid month.
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