India’s bonds fell the most in almost two months on concern that curbs the government put on companies borrowing overseas will reduce surplus cash in the financial system, damping debt demand. Ten-year notes ended four days of gains after the finance ministry on Tuesday imposed caps on foreign debt.
“Bonds have fallen because traders are concerned that the restrictions on external borrowings will cause banking system liquidity to decrease,” said K.P. Suresh Prabhu, chief bond trader at HDFC Bank Ltd in Mumbai.
The yield on the benchmark 7.49% note due April 2017 rose 9 basis points, or 0.09 percentage point, to 7.91% at close in Mumbai—the biggest increase since 11 June. The price fell 0.58, or 58 paise per Rs100 face value, to 97.19.
“Concerns remain in the bond market over inflation outlook,” said Namrata Padhye, a fixed-income strategist at IDBI Gilts Ltd in Mumbai. bloomberg