Mumbai: Bond yields rose on Friday, as borrowing uncertainties overshadowed a lower-than-expected cut-off yield set at a 15-year paper auction.
After the market closed, the government increased the size of its weekly bond auctions by 25% to Rs150 billion ($3.1 billion) on June 26, its sixth consecutive increase, reinforcing concerns it may overshoot its borrowing target.
The yield on the most traded 6.07% 2014 bond ended at 6.64%, above its previous closing of 6.59%.
The yield on the benchmark 10-year bond, which registered only 20 trades, rose to 6.93% from its previous closing of 6.91%.
The 10-year yield has risen 4 basis points this week and is up 23 basis points this month.
Volumes were heavy at Rs91.30 billion on the central bank’s trading platform.
“The medium-term trend for yields is to firm up due to continuous supplies, but the excess liquidity will prevent a big rise,” said Sanjay Arya, deputy general manager of treasury at state-run Bank of Maharashtra.
“The government’s borrowing plan is a huge factor for yields. The market will also watch out for expenditure details in the budget,” he said.
The quarter percent increase in weekly auction sizes has triggered concern the government may raise the Rs3.62 trillion gross borrowing target announced in the interim budget in February.
The government is scheduled to announce the final budget for 2009-10 budget on 6 July.
The Reserve Bank of India set a cut-off yield of 7.35% at the auction of the new 15-year bond, below the 7.47% forecast in a Reuters poll of traders. The cut-off yields of other bonds sold were broadly in line with expectations.