India Rally Revives With First Sub-7% Bond Sale Since 2009 Seen

Updated on
  • Coupon for new paper expected at 6.98 percent: PNB Gilts
  • Yield on notes due January 2026 drops to lowest since Aug. 19

Indian bonds advanced amid speculation the government’s planned issuance of a new benchmark 10-year security will boost demand for the nation’s debt.

India plans to sell 80 billion rupees ($1.2 billion) of sovereign notes due in 2026 as part of the 140-billion rupee auction on Sept. 2, according to a statement late Monday from the central bank, which manages the government’s borrowing program. PNB Gilts Ltd. sees the coupon on the new 10-year paper at 6.98 percent, which will be the lowest for such an issuance since 2009.

Previous 10-Year Issuances and Cut-off Yields

January 20167.59%November 20118.79%
May 20157.72%April 20117.80%
July 20148.40%April 20107.80%
November 20138.83%July 20096.90%
June 20128.15% 

“We expect that the new 10-year will be extremely well bid,” said Vijay Sharma, New Delhi-based executive vice-president for fixed income at PNB Gilts. “The market is adjusting to the expected lower cutoff.”

The yield on the current 10-year notes maturing in January 2026 dropped one basis point to 7.11 percent in Mumbai, its lowest close since Aug. 19, prices from the central bank’s trading system show. It fell one basis point on Monday after climbing three basis points last week.

“The when-issued market trading is suggesting the coupon coming in between 6.95 percent to 7 percent,” said R. Sivakumar, Mumbai-based head of fixed income at Axis Asset Management Co., which oversees about 410 billion rupees.

India’s rupee rose 0.2 percent to 67.03 per dollar, according to prices from local banks compiled by Bloomberg. The currency has weakened 1.3 percent this year, the worst performance in Asia after China’s yuan.