India’s 10-year bonds dropped for a fourth day, with the yield at its highest level in more than four months, on speculation increasing debt issuance by the government will pare demand for existing notes.
India sold 160 billion rupees ($2.7 billion) of bonds at an auction on April 4, the first sale for the fiscal year that began April 1. The government will sell an equal amount of notes on April 11, the Reserve Bank of India said after the close of trading today. The markets are shut tomorrow for a local holiday.
The yield on the 8.83 percent sovereign bonds due November 2023 jumped four basis points, or 0.04 percentage point, to 9.10 percent in Mumbai, prices from the central bank’s trading system show. The rate, which is at the highest for benchmark 10-year debt since Nov. 22, fell as low as 9.03 percent earlier.
“Markets fell under their own weight later in the session as investors positioned themselves for the next auction and ahead of tomorrow’s holiday,” Prasanna Patankar, senior vice president at STCI Primary Dealer Ltd. in Mumbai, said in a phone interview. “It was a reality check.”
India’s government may borrow 3.68 trillion rupees, or 62 percent of the full-year issuance plan, in the April-September period, Economic Affairs Secretary Arvind Mayaram said March 28. That contributed to a 26 basis point surge in 10-year yields last week, the biggest jump since November.
The Reserve Bank of India conducted two term-repurchase auctions on April 4 to add cash to the banking system. Governor Raghuram Rajan, who has raised interest rates three times since September, left them unchanged at an April 1 review after consumer-price inflation eased to a two-year low and the rupee rallied 3.2 percent last quarter.
One-year interest-rate swaps, derivative contracts used to guard against swings in funding costs, fell one basis point today to 8.66 percent, according to data compiled by Bloomberg. They climbed nine basis points last week.