Indian Bonds Advance as Government Borrowing Program Nearing End

India’s 10-year bonds rose, pushing the yield to a two-week low, on optimism demand for existing debt will increase as the government’s annual borrowing program draws to a close.

The finance ministry is scheduled to raise as much as 100 billion rupees ($1.6 billion) this week at the final auction of the year through March. Investors are awaiting the outcome of a mobile-spectrum auction today, the success of which would boost the government’s income and help its efforts to cut the budget deficit, according to Development Credit Bank Ltd. The rupee strengthened, snapping a two-day decline.

“The auction calendar is nearing its end,” said Debendra Kumar Dash, a trader at Development Credit Bank in Mumbai. “If the spectrum-auction results are good, then we could see another drop in yields.”

The yield on the 8.83 percent securities maturing in November 2023 fell four basis points, or 0.04 percentage point, to 8.73 percent in Mumbai, according to the central bank’s trading system. That’s the lowest rate since Jan. 23.

India’s April-December budget gap was 95.2 percent of the target for the year ending March 31, official data showed Jan. 31. The government aims to rein in the shortfall to within 5.42 trillion rupees, or 4.8 percent of gross domestic product, this fiscal year, according to official estimates.

To achieve this, the finance ministry will probably cut spending and delay subsidy payouts, which would hurt economic expansion this quarter, Radhika Rao, an analyst at DBS Bank Ltd. in Singapore, wrote in a research report today.

The rupee rose 0.1 percent to 62.5750 per dollar, according to prices from local banks compiled by Bloomberg. One-month implied volatility, a gauge of expected moves in the exchange rate used to price options, fell three basis points to 10.67 percent.

Three-month offshore non-deliverable forwards fell 0.1 percent to 64.04 per dollar, data compiled by Bloomberg show. Forwards are agreements to buy or sell assets at a set price and date. Non-deliverable contracts are settled in dollars.

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