Mumbai: Indian federal bond yields treaded water on Wednesday as demand for debt from cash-flush banks was offset by large supplies in the offing.
The government is expected to continue borrowing Rs150 billion ($3.1 billion) every week at least till the end of September, a senior finance ministry official said.
At 11:14am (0544 GMT), the yield on the most traded 6.90% bond maturing in 2019 was at 6.81%, two basis points below its previous close. There were no deals in the benchmark 10-year bond.
Volumes were moderate at Rs42.80 billion on the central bank’s trading platform.
Overnight indexed five-year swap rates rose to 6.11-6.16% from Tuesday’s closing of 6.10-6.15%.
“There is demand for debt and even though there are fears of a front-loaded borrowing, buying is seen at every dip,” said a senior dealer at a foreign bank.
Cash levels in banks have been in excess due to slower loan growth amid an economic downturn. Banks are required to invest at least 24% of their deposits in government bonds.
The government will sell Rs120 billion of bonds on Friday, 20 billion more than planned, but lower than the Rs150 billion that was being auctioned each week since mid-May.
The central bank is also selling Rs90 billion of treasury bills on Wednesday.
Dealers are awaiting a revised auction calendar by the central bank at the end of the week to see how the government planned to sell a record Rs4.51 trillion of debt this fiscal year.
The government has so far sold about Rs1.8 trillion of bonds from the Rs2.4 trillion it had planned to during April to September.
Benchmark 10-year US Treasury notes yield rose to 3.45% on Tuesday, up from 3.35% late on Monday.
Optimism over the outlook for the financial industry after Goldman Sachs, Wall Street’s biggest surviving securities firm, said quarterly earnings surged 33% on strong trading results also hit safe-haven bonds.