Indian bonds lower; banks prefer cash ahead of fiscal-end
The benchmark 10-year bond yield closes 1 basis point higher at 8.79%
Mumbai: Indian government bonds fell marginally on Tuesday as traders opted to conserve cash ahead of the end of the fiscal year, with the April-September borrowing numbers likely to provide an immediate trigger.
Banks typically avoid lending at the end of the financial year to shore up their balance sheets. That pushes the call rate higher, often to double digits, as the period coincides with advance tax outgo.
The government will also underline its borrowing programme on Friday with dealers expecting it to be front-loaded.
Bond investors widely expect the current full-year borrowing target of ₹ 5.97 trillion to be raised once the new government comes to power.
The Reserve Bank of India (RBI) will also review monetary policy on 1 April. Easing inflation has largely led to hopes that RBI will hold rates steady.
“Borrowing calendar, whenever released, may not impact gilts considerably. Strategic investors may add duration, via spread assets, gradually in the run-up to policy, anticipating a dovish stance if not a rate-cut," said Kush Sonigara, a research analyst with My Capital Solutions.
The benchmark 10-year bond yield closed 1 basis point higher at 8.79% after moving in a narrow range of 8.77 to 8.81%. Volumes remained tepid at ₹ 13,550 crore.
Cash is expected to remain tight ahead of the year-end. The RBI announced another additional term repo of ₹ 10,000 crore for Wednesday to further ease cash conditions.
In the overnight swaps market, the benchmark five-year rate closed 1 basis point lower at 8.50%, while the one-year rate ended 2 basis points down at 8.62%. Reuters
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