Caught in global maelstrom, rupee, govt bonds likely to weaken further

Indian government bonds and the rupee are likely to weaken in the year ahead as a series of adverse global developments has led to a rapid tightening of financial conditions, even as the sustainability of domestic growth recovery remains to be seen.

At the end of Samvat 2078, the yield on the 10-year benchmark government bond had climbed a massive 126 basis points (bps), reflecting the significant degree of monetary policy tightening carried out by the Reserve Bank of India (RBI) in the face of persistent inflationary pressure.

Bond prices and yields move inversely. The rupee has shed 10 per cent against the US dollar over the same period, marking the worst performance for the Indian currency in a Samvat year (since