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Yields mock year-ago tenures

BS Banking Bureau

Yields on 10-year paper on March 30, 2002, stood 150 basis points lower than the yield-to-maturity of the one-year paper a year ago, reflecting ample liquidity in the money market.

The sharpest fall was for the 10-year benchmark paper, for which the YTM has dipped by three percentage points from 10.36 per cent on March 31, 2001, to 7.36 per cent on March 30, 2002.

Yields on one-year paper dipped 2.84 percentage points to 6.04 per cent and 2.95 percentage points on five-year paper to 6.53 per cent.

The yield on seven-year paper dropped 2.74 percentage points from 9.71 per cent at the end of fiscal 2000-01 to 6.97 per cent at end March 2002.

The fall in the yields is likely to increase the valuation of the government paper holding of the commercial banks in a range of Rs 180-250 billion.

Banks, however, are not allowed to book the gain on their profit and loss account. In case of depreciation, the banks will have to provide for the loss.

Banks will shift a part of their gain to the investment fluctuation reserve account as they have to build up a portfolio amounting to a minimum of 5 per cent of their total government securities holding on this account within a period of five years.

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