Why did the bond yields shoot up on Friday and how are the yields on Monday, 11th April?

On Friday, immediately after the monetary policy announcement came, the bond yields on the 10-year benchmark bond started rallying sharply. After a gap of almost 34 months, the bond yields crossed the 7% mark and closed at 7.12%. However, that rally has continued on Monday also with the bond yield scaling higher to 7.17% amidst a lot of hawkishness seen in the bond market expectations. There are two key reasons for this sudden spike in yields.

The first reason was the RBI hiking its inflation target for FY23 by 120 bps from 4.5% to a more realistic and believable 5.7%. High inflation puts pressure on the central back it up with rate hikes. The second reason was the RBI making the 3.35% reverse repo rate redundant. The introduction of the standing deposit facility (SDF) at 3.75% effectively translated into a 40 bps spike in reverse repo rates. That is a signal that while the RBI may not have directly hiked the reverse repo rates, it has given out hawkish signals.