Weak demand continues to weigh on G-sec market

THE WEAK DEMAND-SUPPLY dynamics continue to weigh on the government securities market, keeping yields elevated.

- CHRISTINA TITUS

The weak demand from banks, insurance companies and pension funds cannot match the constant supply, said market participants. This has led participants to bid at higher yields in the previous auction, following which the Reserve Bank of India (RBI) rejected the bids. Traders expect higher cutoff yield in the auction, which will be held on Friday.

“As majority of the rate cut is behind us, the support from rate cut cycle to the bond market is over. Yields are still elevated due to continuous supply where demand is not so strong,” said Gaura Sengupta, chief economist, IDFC FIRST Bank. She added that demand has not picked from real investors on account of lower inflows for insurance companies and higher equity allocations by pension funds.