The Monetary Policy Committee decided to stick to the objective of reviving growth over reacting to inflation as its approach is to gradually tackle the prospects of impacting output rather than a `sledge hammer approach that would kill the nascent recovery.

The latest Monthly Economic Review, released by the finance ministry, said the robust recovery in tax collections cushions the fisc towards meeting the budgeted support to the economy. It also said the recent sero-prevalence results signify that India can reduce the likelihood of severe illness due to COVID-19 if the country sustains the momentum of the vaccination programme.

The monetary policy maintains the status quo and is supportive. We are on the path of a nascent recovery and the focus is still growth.

The RBI-induced calm in the bond market has been broken in the past few weeks. Bond yields have moved up by 20-30 basis points in a matter of few days.

The yields are trading high as banks, the main investors into state debt, are concerned over the rising government debt of the Centre and the states coupled with worries over the rising inflation which may force the central bank to exit the lose monetary policy earlier than expected.

The borrowing cost across the states and maturities rose to the highest level since mid-March, reversing the decline seen at last weeks auction at 7 per cent in todays auctions of state government securities, which is a full 24 bps higher than last week, the agency noted.

In April, RBI Governor Shaktikanta Das had said that the RBI will conduct open market purchase of government securities of Rs 1 lakh crore under the G-SAP 1.0 in first quarter of the financial year 2021-22.

The number of people below the poverty line has increased from 6 crore to 13.4 crore due to Covid (Pew Research ). The middle class has shrunk by 3.2 crore due to the pandemic (Pew Research).

The central bank net purchased Rs 34,175 crore of sovereign papers between April 22 and May 4 from the secondary market to ensure lower borrowing costs amid concerns that the second Covid wave would derail the nascent economic recovery. Market experts believe that this could well be a record for a two-week period.

On May 20, the RBI will purchase seven government securities of different maturities amounting to Rs 35,000 crore. There will be no security-wise notified amount.

The first purchase of Rs 25,000 crore last month received an enthusiastic response from the market, RBI Governor Shaktikanta Das said.

Underwriters were forced to rescue a five-year bond sale on April 9 and the RBI canceled an offering altogether on April 16.

The move came on a day when the Reserve Bank of India conducted its first government securities acquisition programme (G-SAP), a mechanism to keep rising yields under check.

As any high school student of economics will tell us, money is the lifeblood of commerce. Bond markets, being the source of money, determine trends in other markets.

At 6.18 per cent, the weighted average yield has spiked to its highest level this fiscal, and this is higher by 4 basis points than the previous week when it was at 6.14 per cent, Care Ratings said in a note.

India’s bond buyers – and the country’s only seller of sovereign debt – don’t seem to be yielding on yields just yet.

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