Mumbai: Bond yields ended slightly lower on Wednesday as investors waited for details of Thursday’s buyback auction, but the prospect of heavy supplies remained a weight on sentiment.
The Reserve Bank of India (RBI) is buying back up to Rs100 billion ($1.9 billion) of bonds on 19 March, and is expected to release details of which issues it will offer to buy on Wednesday evening.
“Trading was dull in the day as market was awaiting details of the buyback papers,” said Baljinder Singh, a trader at state-run Andhra Bank.
“Some action is likely in the papers the central bank (RBI) announces for the buyback in the next session,” he said.
The yield on the 8.24% 2018 bond ended at 6.67%, lower than Tuesday’s close of 6.71% after spending the day in a narrow 6.65-6.76% band.
The yield on the 6.05% 2019 bond ended eased to 6.44% from Tuesday’s closing of 6.50%.
Volumes were a light Rs35.40 billion with the 2019 bond being most traded. Yields found some support in early trade from speculation the RBI had bought bonds in the market on Tuesday.
Traders said the focus has shifted from macroeconomic factors to demand-supply concerns and economic news was unlikely to have a major impact on bonds in the current scenario.
The government is selling Rs100 billion of bonds and Rs80 billion of bills this week. The RBI is also yet to announce how it will raise 120 billion before the fiscal year ends on 31 March after it cancelled an auction last week.
Investors are also worried about record borrowing plans of Rs3.62 trillion for the 2009-10 fiscal year starting on 1 April, and expect yields to rise further in the absence of any support measures from the RBI.