Indian Bonds Advance on Central Bank’s Corporate-Debt Measures

Updated on
  • Panel suggested allowing corporate notes for repo operations
  • Rupee rose 0.1% Thursday, having weakened 1.3% this year

India’s bonds advanced for a second day on speculation the central bank’s measures to improve the corporate debt market will enhance liquidity and bolster demand for government securities.

The Reserve Bank of India on Thursday will announce a set of measures to improve the functioning of the corporate bond market, including potentially allow the securities to be accepted for its liquidity management as recommended by a working group headed by former Deputy Governor H.R. Khan. The central bank currently accepts only sovereign securities and state development loans as collateral. The move will improve trading in company bonds and ease the central bank’s cash management, the working group said.

“Allowing corporate bonds to be pledged to borrow from the RBI will help improve liquidity for the market participants,” said Badrish Kulhalli, a fixed-income fund manager at HDFC Standard Life Insurance Co. in Mumbai. “We have to see what process the central bank puts in place to value these bonds.”

The yield on notes due January 2026 dropped one basis point to 7.12 percent in Mumbai, prices from the central bank’s trading system show.

The yield jumped six basis points Monday after the government named Urjit Patel as the new central bank governor starting next month. Patel helped Governor Raghuram Rajan implement an inflation target.

The rupee rose 0.1 percent to 67.0550 per dollar, according to prices from local banks compiled by Bloomberg. The currency has weakened 1.3 percent this year, the worst performer in Asia after China’s yuan.

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