New Delhi: India’s 10-year bonds fell for the first time in four sessions on speculation the central bank will sell more debt, leaving banks with less money to invest in the securities.
The benchmark bonds also fell as yields at the lowest in more than a week deterred investors. Rupee sales by the Reserve Bank of India to stem currency gains are adding money to the banking system. The central bank is also selling bonds and treasury bills to mop up the surplus cash, which it fears may stoke inflation.
“One immediate negative for the bond market is the threat of more supply,” said Rajesh Babu, a fixed-income trader at state-owned Andhra Bank in Mumbai. “Measures to rein in the rupee increase the risk of more debt sales.”
The yield on the benchmark 7.99% bond due July 2017 rose 1 basis point, or 0.01 percentage point, to 7.89% at the 5:30 pm close of trading in Mumbai, according to the central bank’s trading system. The price declined 0.09, or 9 paise per 100-rupee face amount, to 100.63. The central bank last week resumed sales of the so-called market stabilization debt with maturity of more than a year after a gap of one month.