India Bonds: India's 10-year bond yield falls most in 15 months on budget boost

Karur Vysya Bank

02/02/2024 11:40

By Dharamraj Dhutia and Bhakti Tambe
       MUMBAI, Feb 2 (Reuters) - Indian government bond yields
plummeted this week, with the benchmark yield posting its
biggest drop in 15 months, as investors cheered a
fiscally-prudent federal budget and as U.S. Treasury yields
nosedived. 
    India's benchmark 10-year yield  IN071833G=CC  ended at a
7-month low of 7.0555%, against the previous close of 7.0583%.
The yield fell 12 basis points this week, the sharpest decline
since Nov. 11, 2022. 
    "The budget has provided a positive outlook and a kicker for
bond market as the supply is going to be at same levels whereas
the expected demand is more on account on global bond (index) 
inclusion," VRC Reddy, treasury head at Karur Vysya Bank, said.
    "It is a Goldilocks period for the bond market and time to
play with duration, possible to see the 6.80% levels in the
first half of this calendar year."
    India's government, in its interim budget for the next
fiscal year, said that it aims to reduce the fiscal deficit to
5.1% of gross domestic product, from a downwardly revised 5.8%
for this financial year. 
    It will aim to gross borrow 14.13 trillion rupees ($170.50
billion) via bonds in the next fiscal that starts April 1,
sharply below expectations and also lower than current year's
planned borrowing. 
        On Friday, a bond auction saw good demand.    
    Traders now await the Indian central bank's decision, due on
Thursday, with most expecting no change in rates. 
    The plan to tighten fiscal policy could push the country's
central bank to ease its stance on liquidity, Neeraj Gambhir,
the treasury head of Axis Bank, said on Friday, but he does not
expect any immediate action next week. 
    Meanwhile, U.S. Treasury yields dropped this week amid
rising safe-haven demand, with the 10-year yield  US10YT=RR 
falling over 25 basis points to trade below 3.90%.


($1 = 82.8760 Indian rupees)

 (Reporting by Dharamraj Dhutia and Bhakti Tambe; Editing by
Mrigank Dhaniwala)
 ((Bhakti.Tambe@thomsonreuters.com))