2024-01-01 11:32:42
Indian government bond yields ended the first trading session of the new year marginally higher after a higher-than-expected borrowing plan by states hurt demand, while traders await a recovery of volumes.
The yield on the benchmark 10-year bond closed at 7.1969% on Monday, after finishing at 7.1754% in the final session of 2023.
The benchmark bond yield ended lower for the second consecutive month in December and closed the year down 15 basis points (bps).
“The timing of government debt issuance surprised the market as we did not expect such a high number, which led to some price correction,” said Nandan Pradhan, deputy general manager of treasury at the Cosmos Bank in Mumbai.
Indian states are aiming to raise a record 4.13 trillion rupees ($49.62 billion) through bond sales in the January-March quarter.
This amount is higher than almost all market estimates. Operators were expecting borrowing of around Rs 3.50 trillion in the last quarter of the fiscal year, which ends on March 31.
Market participants will keep an eye on demand from state-owned banks as well as new foreign capital inflows, which could dampen any significant rise in yields.
Last week, state banks made their largest weekly purchases of government bonds for the end of 2023 and Treasury officials predict that banks will also be large buyers this month .
Foreign investment saw a remarkable jump in the last three months of 2023, as the inclusion of Indian bonds in JPMorgan’s indices pushed inflows to their highest level in six years.
Traders also expect the bond yield curve to steepen in 2024, due to expected interest rate cuts from the US Federal Reserve and the Reserve Bank of India. ($1 = 83.2375 Indian rupees) (Reporting by Dharamraj Dhutia; Editing by Sohini Goswami)
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