BackIndian bonds gain; first-half borrowing in line
The benchmark 10-year bond yield closes 2 basis points lower at 8.80%
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Mumbai: Indian government bonds gained on Friday, the last trading day of the fiscal year, as the borrowing plan for April-September came largely in line with market expectations.
India will borrow a gross ₹ 3.68 trillion ($61.11 billion) in the first half of the fiscal year that begins on 1 April, which is 61.6% of the full-year target, Economic affairs secretary Arvind Mayaram said on Friday. The government will borrow an average ₹ 17,000 crore per week in April and May, slightly lower than market expectations of around ₹ 18,000 crore. “The borrowing is more in line with market expectations. I don’t see substantial movement either way," said Kush Sonigara, analyst with My Capital Solutions.
Cash rates spiked to their one-year high as demand was greater than supply at year-end. The overnight call rate rose as much as 13.75%, a typical phenomenon during year-end, when banks shy away from lending as they prefer to hold cash for balance-sheet purposes. It was a tumultuous year for bond markets in which yields rose 85 basis points as the central bank had to resort to extra-ordinary monetary steps to ratchet up short-term interest rates to support a sliding rupee.
The rupee plunged to a series of life lows during last summer after the US Federal Reserve indicated for the first time in May that it would roll back on the flood of easy money that had fed emerging market assets. Yields surged to 9.48% in August, their highest in five years. Yields stabilized after the rupee recovered on the central bank’s move to bring in inflows from non-resident Indians and the government’s move to cut down the current account deficit.
The Reserve Bank of India is expected to keep its key interest rate steady at 8% on 1 April as inflation has eased, according to all 53 economists polled by Reuters. Bonds continued to find support as the rupee surged to an eight-month high, breaching 60 to the dollar.
The benchmark 10-year bond yield closed 2 basis points lower at 8.80%. India’s bond and forex markets are shut on Monday and Tuesday for holidays. In the overnight swaps market, the benchmark five-year rate closed 1 basis point lower at 8.48%, while the one-year rate ended 3 basis points lower at 8.56%. Reuters
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