India’s benchmark bonds posted a weekly drop on speculation inadequate rains will stoke inflation and volatility in emerging markets will rise should Greece default.
The weather office Tuesday tempered optimism spurred by this month’s above-average rainfall, predicting that the total precipitation for the June-September wet season will still be deficient as the El Nino phenomenon brings dry weather. India couldn’t meet its target at Friday’s sovereign-debt auction on speculation investors demanded higher yields. Euro-area finance ministers will convene on Saturday with Greece’s bailout set to expire next week.
The yield on government bonds due May 2025 climbed 11 basis points this week to 7.82 percent in Mumbai, according to prices from the central bank’s trading system. That’s the biggest advance since the period through June 5. The yield, which was steady Friday, has jumped 18 basis points in June.
“The Greece crisis and the uncertainty with regard to monsoons isn’t helping,” said Debendra Kumar Dash, a fixed-income trader at DCB Bank Ltd. in Mumbai. “It’s clear that authorities aren’t happy selling bonds at high yields.”
India may consider expressing the limit on overseas investment in government bonds in rupees, compared with dollars currently, Finance Secretary Rajiv Mehrishi told reporters in New Delhi Friday. The 10-year yield dropped as low as 7.79 percent after his comments as the move could allow increased foreign purchases of the debt. Bonds gave up the gains as the auction results were declared.
The government sold 60 billion rupees ($944 million) of notes, compared with a target of 150 billion rupees, a statement from the Reserve Bank of India, which manages the administration’s borrowings, showed. The central bank didn’t accept any bids for debt maturing in 2024, 2032 and 2044. The amount raised was from securities due in 2030. Trading was extended by an hour to 6 p.m. in Mumbai, with the RBI announcing the results shortly after the scheduled close of 5 p.m.
The rupee fell 0.1 percent from June 19 to 63.6425 a dollar, according to prices from local banks compiled by Bloomberg. It was little changed Friday.