Mumbai: Bonds fell the most in almost three weeks on concern that rising supply from government debt sales will reduce demand for existing securities.
Benchmark 10-year note yields climbed to a six-week high on speculation some investors sold to accommodate new issuance of Rs15,000 crore of bonds on Thursday, 25% more than originally scheduled. A finance ministry official had on Wednesday said India may borrow more than planned in the first half of the fiscal as it frontloads its debt sales.
“Concerns from higher supply are going to persist and push yields till the time investors see any kind of respite,” said Srinivasa Raghavan, head of treasury at Mumbai-based IDBI Gilts Ltd, a primary dealer that underwrites government debt sales. “Investors are going to demand higher premiums and we can only wait and watch.”
The yield on the 6.05% note due February 2019 climbed 11 basis points to 6.73% on Thursday, according to the central bank’s trading system. The price fell 72 paise per Rs100 face amount, to 95.20. One basis point is 0.01 percentage point.
The government sold four bonds maturing between 2016 and 2035 at an auction, the central bank said. Primary dealers, who underwrite government debt sales, had to purchase Rs370 crore of the unsold 2035 securities.