India’s 10-year bonds fell, pushing yields to the highest level in almost 32 months, on speculation that demand for existing notes would decrease after the government boosted the amount of new debt it planned to sell.
India plans to raise $2.6 billion selling securities maturing in 2018, 2021 and 2040 tomorrow, according to the central bank. The government had said it planned to lift treasury bill sales for the six weeks through June 30 by 50 per cent. “Unabated debt supply is currently the main concern for the bond market,” said Anoop Verma, a fixed-income trader at Development Credit Bank Ltd in Mumbai. “The government’s move to boost treasury bill sales is adding to the pressure.”
The yield on the most-traded 7.80 per cent note due April 2021 climbed two basis points to 8.40 per cent at close in Mumbai, according to the central bank’s trading system. That is the highest level for a benchmark 10-year bond since October 1, 2008. The cost of one-year interest-rate swaps, or derivative contracts used to guard against fluctuations in borrowing costs, increased. The rate, a fixed payment made to receive floating rates, rose five basis points, or 0.05 percentage point, to 8.12 per cent.
Rupee gains
The rupee rose from a two-month low after the country’s benchmark stock index rallied on better- than-forecast quarterly profits.
Call rate recovers
The call rate recovered on the overnight call money market on Thursday, owing to lack of liquidity. The overnight call money rate moved between 7.50 per cent and 7.30 per cent before closing at 7.30 per cent, higher than Wednesday's close of 7.00 per cent.
