India Bonds: India bond yields flat as rupee's recovery offsets record state debt auction

Ujjivan Small Finance Bank

26/03/2024 11:39

By Dharamraj Dhutia
       MUMBAI, March 26 (Reuters) - Indian government bond
yields started the holiday-truncated last week of the financial
year with a sideways movement as the effect of the rupee's
recovery from all-time lows was offset by a record-high amount
of state debt sale. 
    The benchmark 10-year yield  IN071833G=CC  ended at 7.0908%,
following its previous close of 7.0927%. Indian markets were
shut on Monday and will be closed on Friday for a public
holiday. 
    "Since it is the last week of the fiscal, and it's a short
one, we are not seeing any major moves. But going into the new
year, I expect yields to move down as liquidity could improve
and supply pressure, especially from states, should ease," said
Rajeev Pawar, head of treasury at Ujjivan Small Finance Bank.
    Bond yields had climbed on Friday as the rupee fell to a
record low. But the currency recovered to end at 83.28 to the
dollar on Tuesday, helped by likely central bank intervention
and an uptick in its Asian peers.  INR/ 
    Earlier in the day, Indian states raised a record 550.32
billion rupees ($6.61 billion) through bond sales at cutoff
yields that were largely in line with estimates.
    This, along with the more-than-742-billion-rupees states
raised in two auctions last week, will push up the gross supply
for the fiscal to above 10 trillion rupees.
    States are likely to gross borrow a record 11.1 trillion
rupees in the next financial year starting April, according to
ICICI Securities Primary Dealership.
    Meanwhile, U.S. yields continue to remain elevated, with the
10-year yield  US10YT=RR  trading close to the 4.25% mark, as
recent data continues to raise concerns around monetary policy
easing even though the Federal Reserve maintained its outlook
for three cuts in 2024. 
    Traders now await the borrowing calendar for the first half
of the next financial year as well as foreign participation in
local bonds, especially after a selloff last week.
 
 ($1 = 83.2677 Indian rupees)

 (Reporting by Dharamraj Dhutia; Editing by Savio D'Souza)
 ((Dharamraj.dhutia@tr.com))