10-year bond yield was at 7.531%, a level last seen on 16 March 2016, up 10 basis points from its Wednesday’s close of 7.43%

India’s 10-year bond yield on Thursday rose to a 22-month high and the rupee fell after the government increased its fiscal deficit target and borrowing programme.

The 10-year bond yield rose to 7.531%, a level last seen on 16 March 2016, up 10 basis points from its Wednesday’s close of 7.43%. One basis point is one-hundredth of a percentage point. Bond yields and prices move in opposite directions.

The government set the fiscal deficit target at 3.3% of the gross domestic product (GDP) for fiscal year 2019. Analysts had expected a target of 3%. The government also revised the fiscal deficit for 2017-18 to an estimated 3.5% of the GDP compared to the target of 3.2%.

Finance minister Arun Jaitley, unveiling the budget for the next fiscal year, pegged the government’s borrowing in the year at Rs6.06 trillion, compared to Rs6.05 trillion in the year to March 2018.

The 10-year bond yield was at 7.531%, a level last seen on 16 March 2016, up 10 basis points from its Wednesday’s close of 7.43%. Bond yields and prices move in opposite directions.

The Indian rupee fell nearly 0.4% against the US dollar as local equity markets declined after the government proposed 10% long-term capital gains tax on equity gains above Rs1 lakh.

The home currency was trading at 63.83 per dollar, down 0.45% from its previous close of 63.59. The rupee opened at 63.70 per dollar and touched a low of 63.91 per dollar.

The BSE’s benchmark Sensex index fell 0.16% or 57.63 points, to 35,907.39. So far this year, the Sensex has risen 5%.

Since the beginning of this year, the rupee has gained 0.45%, while foreign institutional investors have bought $2.08 billion of local equities and $1.35 billion of debt.

source: livemint.com