India’s 10-year bonds fell for a second day, pushing the yield to the highest level in more than a week, on speculation less cash in the financial system will damp demand for debt.
Banks borrowed an average 839 billion rupees ($15 billion) a day from the central bank this month to meet shortages, compared with 671 billion rupees for the whole of October, official data show. Ten-year yields climbed this quarter as the central bank refrained from resuming open-market debt purchases that were halted in June, according to Srinivasa Raghavan, executive vice president of treasury at Dhanlaxmi Bank Ltd.
“Liquidity has tightened quite a bit,” said Mumbai-based Raghavan. “Without any measures to ease the cash squeeze, bonds will remain around current levels.”
The yield on the 8.15 percent government notes due June 2022 rose one basis point, or 0.01 percentage point, to 8.21 percent in Mumbai, according to the central bank’s trading system. That’s the highest level since Nov. 12. The rate has added six basis points since Sept. 30.
The one-year interest-rate swap, a derivative contract used to guard against fluctuations in funding costs, was little changed at 7.77 percent, data compiled by Bloomberg show.