The Reserve Bank of India has bought 545.8 billion rupees ($9.8 billion) of government notes so far this fiscal year that began April 1, according to its own data. The finance ministry sold 150 billion rupees of securities due in 2017, 2022, 2030 and 2036 today, according to the RBI, part of the government’s record 5.7 trillion rupees annual borrowing program. The benchmark 10-year yield fell the most this quarter since 2008 after the monetary authority cut the repurchase rate by 50 basis points to 8 percent in April to bolster growth.
“The lack of debt buying by the RBI has damped appetite,” said R.S. Chauhan, Mumbai-based chief dealer of currencies and fixed-income at State Bank of Bikaner & Jaipur. “Bonds will be under pressure without support from open-market auctions given the large borrowing plan.”
The yield on the government’s 8.15 percent notes due June 2022 rose nine basis points, or 0.09 percentage point, this week to 8.18 percent in Mumbai, according to the central bank’s trading system. The rate rose five basis points today. The benchmark 10-year yield declined 36 basis points this quarter, the most since the final three months of 2008.
Gross domestic product increased 5.3 percent in the three months through March, the least in nine years, according to government data.
The wholesale-price index climbed 7.55 percent in May from a year earlier, compared with 7.23 percent in April, according to commerce ministry data. India is likely to face elevated inflation risks from supply bottlenecks, the central bank said in its Financial Stability Report released yesterday.
One-year interest-rate swaps, or derivative contracts used to guard against fluctuations in funding costs, rose four basis points this week to 7.81 percent, data compiled by Bloomberg show. The rate rose three basis points today.
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