The biggest blow to the financial markets, equities, bonds and commodities have come from the rise in US bonds; but for the Indian bonds market, the bad news began with the union budget announcing a larger-than-expected market borrowing programme and similar fiscal deficit.

However, late last week there was a bunch of fresh news to react to: 1. Tax collections in January and April to January especially in January continue to be higher than expected. 2. In the gross domestic product (GDP) numbers, the gross value added (GVA) was better, even if GDP was lower and 3. The last Friday bond auction largely succeeded, with RBI probably accepting higher yields and finally US bonds appearing to have stabilised.

In conversation with CNBC-TV18, Badrinivas NC, Head of Markets and Securities of Citi South Asia; and Samiran Chakraborty, Chief Economist of Citi discuss the bond markets and how the economy -- both global and local -- will pan out going forward.

"In general, it's not just the breakeven, but this is a move fostered by a move up in real rate coming on the back of expectations that the economic growth is quite strong along with reflation trade. In some way, this is a good thing because it's an expectation of the fact that the world is getting better and that's why the central banks are in a wait and watch mode to see where the markets settle," said Badrinivas.

"Our own, Citi, expectation is that yields will trend higher. The real yields have moved to minus 0.5 percent-minus 0.6 percent and they could probably go towards zero, which would be fair assuming that the base case of normalization and growth expectations play out," he added.

On the tax front, Chakraborty said, "We have put in our report that we expect between Rs 1 and 2 trillion of benefit to the government. However, the question is that whether the government will cancel the auction or go ahead with the auction and start FY22 with a better cash balance situation which will make the funding of the FY22 deficit much easier."

Watch the video for the complete discussion.

(Edited by : Jerome Anthony)