India’s Bonds Complete Third Weekly Advance as Auction CanceledV. Ramakrishnan
India’s bonds due 2022 completed a third weekly advance after the government scaled back its debt sale program by canceling the final auction of this fiscal year.
The finance ministry scrapped a plan to issue 120 billion rupees ($2.2 billion) of securities scheduled for this week, according to a statement on Feb. 18. The sale was originally part of a program to raise a record 5.69 trillion rupees in the year ending March 31. Expectations that the Reserve Bank of India will buy sovereign notes using open-market auctions are also supporting bonds, according to Barclays Plc.
“In addition to no new supply over the next one and a half months, we think the likelihood of the RBI buying bonds via open-market operations is high,” Barclays analysts including Singapore-based Rohit Arora wrote in a research note today. “These factors are supportive of bonds.”
The yield on the 8.15 percent notes due June 2022 fell three basis points, or 0.03 percentage point, this week to 7.80 percent in Mumbai, according to the central bank’s trading system. The rate fell one basis point today.
The central bank bought 1.3 trillion rupees of government securities this fiscal year from open-market auctions to boost cash at banks, up from 336 billion rupees a year earlier, according to data compiled by Bloomberg.
The one-year interest-rate swap, a derivative contract used to guard against fluctuations in funding costs, rose one basis point this week to 7.63 percent, according to data compiled by Bloomberg. The rate was little changed today.