Indian Underwriters Rescue Bond Sale After Yield Surge

  • Primary dealers buy unsold debt first time since June
  • Benchmark 10-year yields climbed 15 basis points in November

Indian primary dealers bought unsold sovereign debt at an auction for the first time since June, fueling speculation investors sought higher yields as emerging markets brace for an increase in U.S. interest rates.

The government raised 150 billion rupees ($2.2 billion) selling securities due 2024, 2029, 2033 and 2045 on Friday, with underwriters purchasing 19.4 billion rupees of the 2029 notes, according to a Reserve Bank of India statement. Benchmark 10-year notes extended losses after the auction results.

“The RBI probably didn’t want to give higher yields,” said Harihar Krishnamoorthy, Mumbai-based treasurer at the local unit of South African lender FirstRand Ltd. A “near-certain U.S. rate hike in December” and disappointment around the European Central Bank’s monetary stimulus is also weighing on bonds, he said.

Federal Reserve Chair Janet Yellen signaled Thursday that the conditions necessary for a liftoff have been met. India’s 10-year yields climbed 15 basis points in November, the biggest advance since June, as foreign holdings of rupee-denominated debt dropped by 46.9 billion rupees, the most in six months.

The yield on the 2025 notes rose four basis points on Friday, the most since Nov. 27, to 7.76 percent, according to prices from the central bank’s trading system. It fell one basis point this week.

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