India’s Bond Yields Decline Toward 31-Month Low on Borrowing Cut

India’s bonds due 2022 rose, sending the yield toward a 31-month low, after the government cut its annual borrowing program by canceling the final debt sale of this fiscal year.

The finance ministry scrapped a plan to issue 120 billion rupees ($2.2 billion) of securities on Feb. 22, according to a statement on Feb. 18. The sale was originally part of a program to raise a record 5.69 trillion rupees in the year ending March 31. India auctioned bond-investment quotas worth $12.3 billion to foreign funds yesterday, according to two people familiar with the matter, who asked not to be identified as they aren’t authorized to speak to the media.

“Investors are bullish as there will be no debt sale before April,” said Srinivasa Raghavan, Mumbai-based executive vice president of treasury at Dhanlaxmi Bank Ltd. (DHLBK) “The sale of quotas to foreign investors will also spur demand.”

The yield on the 8.15 percent notes due June 2022 fell one basis point, or 0.01 percentage point, to 7.80 percent as of 9:40 a.m. in Mumbai, according to the central bank’s trading system. The rate touched 7.78 percent yesterday, the lowest level for a benchmark 10-year bond since July 2010.

The one-year interest-rate swap, a derivative contract used to guard against fluctuations in funding costs, fell one basis point to 7.65 percent, according to data compiled by Bloomberg.

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

To contact the editor responsible for this story: Amit Prakash at aprakash1@bloomberg.net

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