Banking stocks rally as bond yields fall

Business

oi-Sunil

By Sunil Fernandes

Published: Friday, August 23, 2013, 11:23 [IST]

Banking stocks gained in trade today as government bond yields fell and bond prices rose. Banks in India have to keep a per centage of their deposits in liquid assets, mostly government bonds. When bonds yields rise, bond rates fall and banks take a hit.

Shares in Yes Bank rallied 4 per cent, while ICICI Bank gained 1 per cent and HDFC Bank also rallied 1 per cent. Most of the PSU banks led by IDBI Bank and Oriental Bank were trading higher.

The yield on the benchmark 10-year government bond hit 9.48 per cent earlier this week pushing down shares of Yes Bank and State Bank to 52-week lows. The yields have now cooled to 8.30 per cent, which has led to a rally in banking stocks.

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