Bond Yields at Seven-Week Low as India Retains Borrowing Target

India’s 10-year bonds advanced, pushing yields to a seven-week low, as the government kept its borrowing target for the second half of the fiscal year unchanged.

The Finance Ministry plans to raise 2 trillion rupees ($38 billion) in the six months to March, Economic Affairs Secretary Arvind Mayaram told reporters yesterday. The debt sales will take the total borrowing for the year to a record 5.69 trillion rupees, as budgeted. The government cut diesel subsidies this month and announced plans to revive asset sales to lift revenue.

“The government’s resolve to stick to its borrowing program is positive for bonds,” said Srinivasa Raghavan, an executive vice president of treasury at Dhanlaxmi Bank Ltd. (DHLBK) in Mumbai. “Efforts to increase revenue and control the fiscal deficit is triggering some buying.”

The yield on the 8.15 percent notes due June 2022 fell one basis point, or 0.01 percentage point, to 8.15 percent in Mumbai, according to the central bank’s trading system. The rate has dropped three basis point this quarter.

The finance ministry targets reducing the fiscal deficit to 5.1 percent of gross domestic product in the current fiscal year that began April 1 from 5.8 percent last year.

One-year interest-rate swaps, or derivative contracts used to guard against fluctuations in funding costs, fell three basis points to 7.63 percent, according to data compiled by Bloomberg. The rate fell 18 basis points this quarter.

To contact the reporter on this story: V. Ramakrishnan in Mumbai at rvenkatarama@bloomberg.net

To contact the editor responsible for this story: James Regan at jregan19@bloomberg.net

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