India bond sale through amid record cash pile at banks

India’s first sovereign bond auction since the sharp increase in the government’s borrowing sailed through, helped by record cash in the nation’s banking system.

The yield cut-offs at the bond sale were in line with expectations with a surprise 40 billion rupees ($529 million) extra accepted in the planned 300-billion rupee auction.

The 6.18% 2024 bond was sold at a yield of 5.2012%, in line with 5.20% estimated in a Bloomberg News survey of five banks. The 7.57% 2033 cut-off yield also matched forecast at 6.4615%, while the 2050 yield was set at 6.8281%, slightly below the 6.85% median estimate.

“Despite the massive borrowing program, there’s isn’t any panic as the central bank is ensuring that the yields remain conducive for the bond-sale program” said Anoop Verma, vice president for treasury at DCB Bank Ltd. Demand is good as excess liquidity in the system means that money will naturally flow into bonds, he said.

A jump in the government’s bond-sale program by more than half to 12 trillion rupees last week has led to expectations that the Reserve Bank of India will need to step in to support the market.

The central bank hasn’t announced any measures. Excess liquidity at banks stands at ₹7.5 trillion as a result of previous RBI measures.

The RBI accepted 80 bids for the 2024 bond, and 79 and 6 bids, respectively, for 2033 and 2050 sale.