India’s 10-year bonds dropped the most since September 2001 after the government said it will increase debt sales to fund additional spending.
The benchmark bond slid for the third day, pushing yields to a three-week high, as India said it will sell Rs 35,000 crore ($7.2 billion) of debt this month, Rs 5,000 crore more than an earlier plan. The government last week announced a second stimulus package to counter the effect of the global economic slump on Asia’s third-biggest economy.
The yield on the 8.24 per cent note due April 2018 climbed 57 basis points to 5.87 per cent at close. The price fell Rs 4.55 per Rs 100 face amount to 116.75. The Negotiated Dealing System of the central bank extended trading by 30 minutes On Wednesday, without citing a reason.
On January 9, the government will sell Rs 7,000 crore of the 7.59 per cent notes maturing in 2016, Rs 4,000 crore of the 6.3 per cent notes due 2023 and Rs 4,000 of 7.5 per cent notes due 2034.
India may fail to meet the budget-deficit target for the year ending March 31 because of a global crisis that forced the nation to borrow and spend more, Palaniappan Chidambaram said October 22. Chidambaram was India’s finance minister before moving to the home ministry in early December.
The cost of five-year swaps, or derivative contracts used to guard against rate fluctuations, rose. The rate, a fixed payment made to receive floating rates, climbed to 4.97 per cent from 4.79 per cent yesterday.
Rupee slips to 48.73 as stocks fall
The rupee fell to the lowest this week as stocks tumbled after the chairman of Satyam Computer Services resigned, saying the software company had falsified accounts and assets.
The rupee slipped 0.1 per cent to 48.73 a dollar at close. The currency, which last month reached a record low of 50.615, may weaken to 49 in the coming days, Arya said.
The rupee strengthened earlier as gains in Asian equities fanned speculation investors are buying more of the region’s assets. It also advanced as the dollar’s losses against currencies of industrialised nations spurred sales of the greenback in the local market.
Funds based abroad bought a net $110.3 million of Indian stocks on January 6, the most in more than two weeks. The MSCI Asia Pacific Index of equities rose 1.5 per cent On Wednesday.
