With no new catalysts, India bonds stay flat as traders brace for supply
The benchmark 10-year 6.48% 2035 bond yield was at 6.6098% as of 10:05 a.m. IST, after ending at 6.6105% on Wednesday. Bond yields move inversely to prices.
“There is nothing to look forward to for the day, and hence traders will now become active only on the auction day,” a trader with a state-run bank said.
Indian government bonds saw little movement as traders awaited Friday’s debt sale, despite the Reserve Bank of India’s substantial bond purchases. Concerns over hefty supply persist, even as the market anticipates potential inflows from Indian bonds’ inclusion in the Bloomberg Aggregate Index next week. Overnight swap rates showed mixed trading.
New Delhi will auction 290 billion rupees ($3.2 billion) of 15-year and 40-year government bonds on Friday, at a time when states have announced that they will raise a record 5 trillion rupees through bonds in the January-March quarter.
Bonds have stayed under pressure despite the Reserve Bank of India’s aggressive debt buying. The RBI bought 500 billion rupees of bonds earlier this week and is set to bid for twice that amount via additional purchases through January 22.
So far this financial year, the RBI has bought bonds worth a record 4.7 trillion rupees, but the purchases have failed to soothe concerns about hefty supply.
Market sentiment has also remained subdued because the RBI has been opting for thinly-traded securities at these purchases, defying expectations for inclusion of a former benchmark and other liquid papers. Meanwhile, traders eye inclusion of Indian bonds in Bloomberg Aggregate Index, with the announcement due as early as next week. Goldman Sachs says the inflows could be in the range of $10 billion to $20 billion.
RATES
India’s overnight index swap rates were not traded much.
The one-year OIS ended at 5.4625%, while the two-year OIS rate closed at 5.55% on Wednesday.
The five-year OIS rate was marginally down at 5.91%. ($1 = 89.8460 Indian rupees).
