Bank Profits Expected as Government Bond Yields Fall Q1

By  Shweta Munjal
Updated On
Bank Profits Expected as Government Bond Yields Fall Q1

Banks would earn more treasury gains in the first quarter of the financial year because the yields of government bond has reduced. The looming entry of JP Morgan bond index has prompted foreigners to bring in their money now, thus lowering the yield of 10 year government bond by 6 bps. This is because current investment regulation changes provide for the notion that reclassification of bond investments has to go through the permission and approval of the regulation authority and in this case banks are likely to gain. These new rules that became effective on the 1st of April correspondingly require banks to classify bonds into held to maturity, available for sale and fair value through profit or loss categories.

Effects of Bond Yield Movements

They are sensitive indicators of the status of the government’s balance and predicted changes in interest rates. If yields brought down and costs of bonds up so treasury revenues relating to the banker which possesses such bonds. The consistent decrease up to the current yields is as a result of foreign investment, market stock, and market liquidity ratios.

Regulatory Changes: A Two Blade Knife?

The softening yields which the new investment norms present the prospect of serves also to restrain it. The regulations enhance the expansion of classifications of bond holdings that were a distortion that was frequently utilised by banks to rearrange their portfolio to better yielding securities.

The Strategic Advantage

Indeed, the structure of today current sovereign bonds influences the stock position of the banks nevertheless these latter are not blocked to enhance their lists of treasures in according with the current status of the bond market. In fact, expansion of bonds in the index of JP Morgan can bring even more foreign investors and constant lowering of yield and overall treasury incomes.


Banking, in the process of the unfolding of the Q1, will get some support from the moderation of government bond yields, but within the framework of the new ordinance. The above scenario raises the question on the proper management of assets, more especially when there are changes in the market regulations and yet at the same time, there are market opportunities that have to be exploited.

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