Mumbai: India’s benchmark bonds fell for the first time in three days on concern increasing government debt sales will reduce demand.
Yields on the most-traded notes due 2018 rose from the lowest in more than a week as 11 states sold Rs12,210 crore of 10-year debt through auctions on Tuesday. The Union government plans to sell Rs10,000 crore of bonds on 20 March, according to the Reserve Bank of India (RBI).
“Appetite for bonds is limited as supply keeps increasing,” said Arvind Sampath, head of interest rate trading at Standard Chartered Plc. in Mumbai. “Yields are higher today (Tuesday) ahead of the state debt sale.”
The yield on the 8.24% note due April 2018 climbed nine basis points to 6.71% at close, according to the central bank’s trading system.
The price dropped 0.65, or 65 paise, per Rs100 face amount, to 109.80. A basis point is one-hundredth of a percentage point.
The securities on Monday posted their biggest two-day advance since 2001 after the central bank said it would buy existing debt this week.
The central bank purchased Rs8,040 crore of the 2018 notes on Monday out of the planned Rs10,000 crore. It has scheduled another open-market operation on 19 March.
The government will sell Rs6,000 crore of 6.05% bonds due 2019 and Rs4,000 crore of 6.72% bonds maturing in 2014 on 20 March.
India plans to sell a record Rs2.61 trillion of bonds in the year ending 31 March, 67% higher than the previous fiscal year, to fund extra spending aimed at countering an economic slump. Its debt-sale target for next year is Rs3.62 trillion.
Asia’s third biggest economy expanded 5.3% last quarter from a year earlier, the slowest pace in five years, the government said on 27 February.
The cost of five-year swaps, or derivative contracts used to guard against rate fluctuations, increased.
The rate, a fixed payment made to receive floating rates, rose to 5.54% from 5.45% on Monday.