India Bonds Fully Sold in Auction on Hope RBI Will Buy the Stock
(Bloomberg) -- India’s central bank sold a planned 320 billion rupees ($4.4 billion) of bonds at its weekly sale on Friday, with many traders expecting the monetary authority to buy off the stock later.
The Reserve Bank of India bought 100 billion rupees of the 6.64% 2035 bond at 6.5881% as against 6.58% estimated in a Bloomberg poll and purchased another 110 billion rupees of the 2026 bond at a 5.5442% yield. Earlier, the low underwriting fees had indicated that the auction will be well bid.
Traders said that the demand in auction for the longer papers, including the 2035 bond, suggests that investors were hoping that the RBI will offer to buy the longer papers at its scheduled 350 billion rupee debt purchase on May 20. The details of the papers to be bought are yet to be announced.
“Demand is building up simply because RBI has been absorbing so much of incremental supply,” said Badrish Kulhalli, head of fixed income at HDFC Life Insurance Co.
The 10-year bond yield was up two basis points to 5.99%, little changed after the auction results. Last week’s auction also saw strong demand for the benchmark 10-year bonds and the RBI subsequently bought 100 billion rupees of the paper at its Operation Twist on Thursday.
RBI Governor Shaktikanta Das had earlier offered assurance to bond investors by announcing one trillion rupees of bond purchases this quarter and promising to keep rates low for as long as necessary to get the nation’s economic growth back on track. Still, they fear that the government may need to borrow more if it faces revenue loss amid calls for a nationwide lockdown to tackle the world’s worst virus crisis.
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