Banking Stocks Fall As Bond Yield Rise

Subscribe to GoodReturns
For Quick Alerts
For Daily Alerts

    Banking stocks fell in trade today, as bond yields surged after the RBI minutes of meeting of its earlier MPC meet this month indicated a more hawkish tone.

    Interestingly, the minutes showed that that Reserve Bank of India Deputy Governor Viral Acharya has tilted in favour of rate hike in June. He will now join RBI Executive Director, Michael Patra, who is also seeking a rate hike.

    Banking Stocks Fall As Bond Yield Rise
    Shares of Allahabad Bank (down 2.5 per cent), Andhra Bank (down 2.3 per cent), Oriental Bank of Commerce (down 2.8 per cent), Canara Bank (down 3.7 per cent) , Syndicate Bank (down 2.19 per cent), Punjab National Bank (2.55 per cent down 1.98 per cent) were the major losers in trade.

    Bond yields are inversely related to prices. When bond yields rise, bond prices fall. When this happens banks have to make provisions for marked to market losses, which impact financials. Most of the government banks are major investors in government securities, as compared to private sector peers.

    Even the private sector banking stocks like HDFC Bank, IndusInd Bank and Karnataka Bank were trading lower, though they were seeing only marginal losses.

    If bond yields rise, we may see further drop in stock prices of banks.

    Read more about: stocks banks
    Story first published: Friday, April 20, 2018, 11:23 [IST]
    Company Search
    Enter the first few characters of the company's name or the NSE symbol or BSE code and click 'Go'

    Find IFSC

    We use cookies to ensure that we give you the best experience on our website. This includes cookies from third party social media websites and ad networks. Such third party cookies may track your use on Goodreturns sites for better rendering. Our partners use cookies to ensure we show you advertising that is relevant to you. If you continue without changing your settings, we'll assume that you are happy to receive all cookies on Goodreturns website. However, you can change your cookie settings at any time. Learn more