Who wrote this article?

Deepak Shenoy, Capitalmind's research team.

Bond Markets Crash, All Yields Above 9%

19 Aug 2013Deepak Shenoy1 min read

Quick Facts

What is "Bond Markets Crash, All Yields Above 9%" about?
What category is this article in?: Fixed Income
Who wrote this article?: Deepak Shenoy, Capitalmind's research team.
When was this article published?: Published 19 August 2013.
How long does this article take to read?: 1 min read

Bond markets are in a tizzy. The 10 year bond is now close to 9.25%. And that doesn’t even tell you the story – all other bonds, I mean every single one of them – is above 9%, and short term yields are beyond 11%. Look at the yield curve:

Yield Curve

(Source: CCIL)

And look at just the 10 year bond above, over the month of August:

10 yr bond movement in Aug

This is going absolutely nuts.

The 10 yr was issued at Rs. 100 in May. This is a 13% loss in the 10 year security in three months. I don’t remember the last time the bond market was this bad (maybe 1998).

Impact: Mutual funds that hold long term bonds will lose serious money (more than 2% just today). Ultra short term and liquid funds may not be impacted much. Banks will lose big time as they hold nearly 44% of all government securities. LIC and other Insurers (18%) are next.

Money is getting more expensive. Expect deposit rates to increase. Then, expect lending rates to increase.