India’s 10-year bonds declined on concern the government will overshoot its borrowing target to finance its budget as slowing growth hurts revenue.
Yields rose before the government introduces its borrowing calendar for the second half of the fiscal year by Sept. 30. Sovereign debt issuance will exceed the 5.69 trillion rupee ($107 billion) goal for the year ending March 31 by 500 billion rupees, according to the median of eight estimates compiled by Bloomberg News.
“Investors are concerned about the debt supplies,” said R.S Chauhan, Mumbai-based chief dealer of fixed-income and currencies at State Bank of Bikaner & Jaipur in Mumbai. “Yields will rise more if the borrowing exceeds expectations.”
The yield on the 8.15 percent notes due June 2022 rose 1 basis point, or 0.01 percentage point, to 8.17 percent in Mumbai, according to the central bank’s trading system.
The finance ministry is due to sell 150 billion rupees of bonds on Sept. 28, taking government borrowings in the first six months of this fiscal year to 3.7 trillion rupees, or 65 percent of the full-year target, according to central bank data. Revenue was 1.69 trillion rupees in the April-July period, 18 percent of the budget estimate, the data show.
Analysts predict Prime Minister Manmohan Singh will fail to rein in the budget deficit as planned to 5.1 percent of gross domestic product this fiscal year from 5.8 percent in the preceding 12 months.
ICICI Securities Primary Dealership Ltd. forecasts a 6.1 percent deficit, while Nomura Holdings Inc. and Anand Rathi Financial Services Ltd. project a 5.8 percent shortfall. Fitch Ratings and the Indian unit of Daiwa Asset Management Co. expect a gap of 5.7 percent of GDP.
One-year interest-rate swaps, or derivative contracts used to guard against fluctuations in funding costs, rose 2 basis points to 7.71 percent, according to data compiled by Bloomberg.