Bond Traders in India Hope Mystery Buyer Is the Central BankBy
Investors in ‘Others’ category purchase most debt on record
Traders speculate that the RBI may be behind the buying
Has an invisible hand stepped in to support the Indian sovereign bond market? Traders are abuzz with speculation over the identity of the buyer or buyers behind the $862 million of purchases Friday.
Investors in a category labeled ‘others’ bought a net 57-billion rupee of debt, the most for that group since at least 2006, according to data compiled by Bloomberg. These buyers could comprise the Reserve Bank of India, insurance companies and pension funds.
The purchase couldn’t have come at a better time, with high oil prices and unexpectedly hawkish RBI minutes combining to spur a 29-basis point jump in the benchmark yield last week. Speculation swirling around trading floors in Mumbai has it that the central bank may be behind the buying, with the official data from the RBI only available coming Friday.
“The large buying by ‘others’ has led to some speculation about the RBI,” said Ajay Manglunia, head of fixed income at Edelweiss Financial Services Ltd. “The market is overbeaten and a lot of pessimism has already been built in.”
While the RBI has sporadically bought bonds in the secondary market for managing its own balance sheet, the last time it was a consistent buyer was over two months through January 2016. The central bank didn’t immediately reply to an email request for comment.
Yields have jumped 54 basis points over the past two weeks despite a slew of measures by the government and central bank to support the market. The authorities have raised foreign investment caps, allowed banks to spread out bond losses and cut the size of the borrowing program.
Still, the release of RBI’s April minutes on Thursday sparked a new selling spree as Deputy Governor Viral Acharya said he would vote for the start of the withdrawal of accommodation at the June meeting.