Yields on the benchmark 10-year bond are expected to now touch 7.5 per cent during this fiscal with CPI (consumer price index) inflation coming in at a 17-month high of 6.95 per cent.
Market circles were earlier forecasting yields on the 10-year bond to go up to 7.25-7.40 per cent following the hawkish policy of the Reserve Bank of India (RBI) last Friday.
“With the CPI inflation surging in March 2022, we expect the 10-year G-sec yield to cross 7.2 per cent imminently. With dimming hopes of early bond index inclusion, the 10-year G-sec yield could test 7.5 per cent in the first half of 2022-23,” Aditi Nayar, chief economist, ICRA said.
The 10-year bond yield on Tuesday settled at 7.19 per cent, up from the last close of 7.15 per cent.
The benchmark Sensex on Tuesday slid 388.20 points to close at 58576.37 as investors took money off the table because of rising inflation and bond yields that could have an adverse impact on interest rates. The 30-share gauge has slipped nearly 900 points in two sessions.
The rupee fell 24 paise to close at 76.15 against the dollar on Tuesday tracking a strong American currency in the overseas market and a negative trend in domestic equities.
