India’s 10-year bonds rose for a second day on speculation investors will add to holdings after yields climbed to a three-year high this week.
Rates on debt due 2021 have added 46 basis points since the finance ministry raised its borrowing target for the six months through March 2012 by 32 percent to 2.2 trillion rupees ($44.8 billion) on Sept. 29. Overseas funds added $254 million to holdings of Indian debt this week, exchange data show, as the extra yield on 10-year sovereign notes over U.S. Treasuries touched a 12-year high of 6.95 percentage points on Nov. 1.
“The yield levels are attractive for those who want to hold the bonds for the medium to long-term,” said R.S. Chauhan, Mumbai-based chief dealer of fixed income and currencies at State Bank of Bikaner & Jaipur. “Bonds may not gain much from here as investors are still wary of large debt supplies.”
The yield on the 7.8 percent securities due April 2021 fell one basis point, or 0.01 percentage point, to 8.90 percent in Mumbai, according to the central bank’s trading system. The rate touched 8.95 percent on Nov. 1, the highest level for a benchmark 10-year bond since August 2008.
The finance ministry will sell 60 billion rupees of a new 10-year security tomorrow. It will also sell 40 billion rupees of bonds due 2018 and 30 billion rupees of 2027 debt.
The cost of one-year interest-rate swaps, or derivative contracts used to guard against fluctuations in borrowing costs, was unchanged at 8.21 percent, according to data compiled by Bloomberg.
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