Mumbai: India’s Rs6.06 trillion ($93 billion) of debt sales from April mean bond traders are brushing aside the most benign inflation data they have had in four months.

While a government report on Monday showed inflation slowed for a second month, it’s the near-record bond auctions starting in weeks that’s dominating talk, said Naveen Singh, head of fixed-income trading with ICICI Securities Primary Dealership Ltd. in Mumbai. With state banks sitting on an estimated quarterly $3 billion of losses, there’s concern about a lack of buyers.

“The biggest problem facing the bond market is with regard to the balance sheets of market participants, which have been damaged badly," said Singh. “If the situation remains unchanged, we are going to see a long tail, debt auctions failing, debt-cover ratio being low."

The yield on the benchmark 10-year debt has advanced 20 basis points since the government announced its new budget on 1 February, amid the worst selloff in two decades. Bloomberg

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