Indian government bonds posted their best gains in 17 financial years, as the central bank delivered its deepest rate cut in eleven fiscals to push a slowing economy, while the use of unconventional policy tools by the central bank and the government's plans to allow more investments in sovereign papers further aided the rise.
The benchmark 6.45% bond maturing in 2029 ended at 102.22 rupees, yielding 6.14%, in Mumbai against 101.71 rupees, yielding 6.21%, yesterday. The yield collapsed 121 basis points this financial year, after falling by a minuscule five basis points last year, but the drop was the largest since the financial year that ended in March 2003. The yield also slipped for the second consecutive month and the sixth consecutive quarter.
The Indian rupee was at 75.66 to dollar at 5:00 p.m., and suffered its biggest financial-year decline against the dollar in six years. Most of these losses came in the final quarter due to the coronavirus outbreak and on growth concerns.
The central bank-led Monetary Policy Committee slashed the key policy rate by 185 basis points this fiscal year, its deepest policy cut since 2008-09, when economies across the world were grappling with a financial crisis. The repo rate has been reduced to a record low of 4.40%, which includes the 75 bps rate cut delivered this month, while the cash reserve ratio stands at a record low of 3%.
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