(Bloomberg) -- The 60 percent cut in India’s planned additional borrowing brought solace to bond traders, who sent the yield on the benchmark 10-year note down by the most in more than a year.
The rally may not endure as the other key factors responsible for the market’s worst selloff in 17 years -- accelerating inflation and the supply overhang -- remain, according to ICICI Securities Primary Dealership Ltd. in Mumbai.
“As the dust settles, bond-market players will come to realize that all other negatives are stacked against them,” said Naveen Singh, head of fixed-income trading at ICICI Securities. “There’s not a single positive metric, domestically and globally, that can ensure a broad-based buying in the bond market.”
The market will remain cautious going into the federal budget due on Feb. 1 amid concerns of the government announcing a larger fiscal deficit. If those fears materialize, the yield on the new 10-year note will rise to as high as 7.75 percent by March-April, he said.
The yield on 10-year bonds slid 16 basis points, the most since November 2016, to 7.22 percent. Benchmark sovereign yield rose in each of the past five months, the longest stretch since 2000.
©2018 Bloomberg L.P.
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