Mumbai: India’s benchmark bonds declined on Wednesday, pushing yields to the highest level in?almost?a?month, on?concerns that an auction of debt by 10 states on 26 March will reduce demand for existing securities.
The yield, which moves inversely to the price, on the most-traded note due 2017 climbed after the overnight money market rate jumped to a two-month high, making debt purchases with borrowed funds more expensive. The central bank injected cash into the system this week for the first time this month, data Bloomberg compiled shows.
“The debt sale hasn’t gone down well given that we are close to the financial year-end on 31 March,” said S. Ananthanarayan, chief bond trader at Kotak Mahindra Bank Ltd. “The sale was unexpected and will cause portfolio readjustment and result in yields rising,” he added.
The yield on the 7.99% note due July 2017 climbed five basis points to 7.63%, according to the central bank’s trading system. That’s the highest since 22 February. The price of the debt fell 0.315, or 31.5 paise per Rs100 face amount, to 102.32. A basis point is 0.01 of a percentage point.
The states plan to raise up to Rs3,250 crore by selling debt maturing in 2018.