Bond Slide in India Shows Frail Market Sentiment Ahead of Budget
The yield on the benchmark 6.45% 2029 debt rose five basis points to 6.58%.
(Bloomberg) --
Indian sovereign bonds fell, after the nation’s central bank skipped a widely-anticipated announcement for open market debt purchases, showcasing the nervousness ahead of the federal budget.
The yield on the benchmark 6.45% 2029 debt rose five basis points to 6.58%.
Unlike the three previous occasions, the Reserve Bank of India didn’t announce its Federal Reserve-style Operation Twist -- where it buys long-end debt while selling short-end bonds -- after market hours Thursday. Still, the yields are down 17 basis points since the central bank first announced the unprecedented bond auctions.
Prime Minister Narendra Modi’s administration, which will unveil federal budget on Feb. 1, is widely expected to breach its 3.3% fiscal deficit aim for the year ending March, raising the specter of higher borrowing. Yields had surged in Thursday trading after ET Now channel reported that the central bank told the government it’s not concerned over a 50 basis points widening in the budget deficit.
“Bond prices are driven by demand-supply and whichever side gets disturbed markets will tend to react,” Saurabh Bhatia, head of fixed income at DSP Investment Managers said. Bhatia expects more open market purchases by RBI and considers an absence of an announcement on Thursday “as a pause rather than a stop.”
Meanwhile, RBI is set sell 160 billion rupees worth of bonds Friday.
To contact the reporter on this story: Subhadip Sircar in Mumbai at ssircar3@bloomberg.net
To contact the editors responsible for this story: Tan Hwee Ann at hatan@bloomberg.net, Anto Antony
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