Bond Yields Rise From Seven-Year Low Before India’s Debt AuctionBy
Government to auction 150 billion rupees of notes on Friday
DCB Bank says there is scope for another interest-rate cut
Indian sovereign bonds snapped a four-session gain on speculation the lowest yields in seven years deterred some investors from buying ahead of Friday’s debt auction.
The yield on notes due September 2026 rose two basis points to 6.70 percent in Mumbai, prices from the Reserve Bank of India’s trading system show. Its close on Wednesday was the lowest for a benchmark 10-year security since June 2009. India’s government plans to sell 150 billion rupees ($2.2 billion) of bonds Friday, including 30 billion rupees of new 30-year debt.
Foreign holdings of local government and corporate notes fell by 27.7 billion rupees on Wednesday, the biggest single-day drop since March. The 10-year yield capped a four-day, 18-basis point decline on the day amid speculation the central bank will add to Tuesday’s interest-rate cut, which sent benchmark borrowing costs to the lowest in more than five years.
“We are now seeing traders booking profit after four sessions of a bullish rally,” said Anoop Verma, vice-president at DCB Bank Ltd in Mumbai. “The outlook for bonds remains positive in the medium-term as there is scope for another rate cut.”
Morgan Stanley expects a reduction of as much as 50 basis points in the key repurchase rate by March, while Nomura Holdings Inc. says a 25-basis-point reduction is likely in February, with December also being a possibility.
The rupee weakened for a second day, falling 0.3 percent, the most in a week, to 66.70 a dollar, prices from local banks compiled by Bloomberg show. The currency climbed 1.4 percent in the last quarter, the most since the three months ended March 2014.