Government bonds declined the most in more than a week as concerns mounted that debt supply will increase after an official said spurring growth tops the government’s agenda.
Benchmark 10-year bonds reversed earlier gains after Montek Singh Ahluwalia, deputy chairman of the nation’s top economic planning body, said it is important to implement the government’s spending program to reverse a slide in gross domestic product. His comments sparked speculation that India will need more funds to finance the two stimulus packages the government unveiled to counter a slump.
“Concerns of extra debt supply are surfacing as it appears the government may still need money to fund the plans it has announced for growth,” said Mahesh Pai, a fixed-income trader at state-owned Canara Bank in Mumbai. “Yields will need to rise to include the extra debt-supply concerns.”
The yield on the 8.24 per cent note due April 2018 climbed eight basis points to 5.68 per cent at close. The price fell 0.65 paise, or 65 paise per Rs 100 face amount, to 118.20. A basis point is 0.01 percentage point.