The bond markets on Friday started faltering after the Finance Minister Nirmala Sitharaman announced the cut in the tax rate for corporate.
With investors worried over the fiscal impact of the measure, the holders of 10-year G-secs started selling the bonds, and the bond yields surged to its highest since July 2.
The bond yield, after the FM’s announcement, surged to 6.874%, highest since it tested 6.876% on July 2. At the time of filing this copy, the 10-year G-sec yields stood at 6.796%
The bond yields and the bond prices share an inverse relationship with each other.
“The resultant deficit will increase government borrowing which will be bond surplus hence demand will fall along with price,” analysts said.
The announcement will cost government revenues to the tune of Rs 1.43 lakh crore, which will impact the government estimates for fiscal deficit at a time when revenue growth isn’t up to mark.
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