Indian bonds halted a three-day advance on speculation a record sovereign borrowing program for the year starting April 1 will damp demand for existing notes.
The government plans to complete 60 percent to 65 percent of its annual debt-sales target by September, a Finance Ministry official with knowledge of the matter said. Bonds erased an earlier gain as investors expect cash supply in the financial system to decline starting next week as companies pay quarterly taxes, said R.S. Chauhan, chief dealer of fixed-income and currencies at State Bank of Bikaner & Jaipur.
“Steady debt supplies and strained liquidity will keep yields at higher levels,” said Mumbai-based Chauhan.
The yield on the 8.15 percent securities maturing in June, 2022 was little changed from yesterday at 7.86 percent after touching 7.85 percent earlier, according to the central bank’s trading system.
The calendar for bonds sales may be set by the ministry and the central bank in the third week of March, the official said. The government will probably have a 750 billion rupee ($13.7 billion) cash balance at the start of the next fiscal year after reining in spending, the official said.
Finance Minister Palaniappan Chidambaram, who unveiled the annual budget on Feb. 28, set a borrowing goal of 6.29 trillion rupees in the year through March 2014, 13 percent more than in the preceding period.
The one-year interest-rate swap, a derivative contract used to guard against fluctuations in funding costs, rose one basis point to 7.59 percent, according to data compiled by Bloomberg.