India Cancels Bond Auction to Calm Yields Amid Global Swings
A man counts Indian rupee banknotes in India. (Photographer: Dhiraj Singh/Bloomberg)

India Cancels Bond Auction to Calm Yields Amid Global Swings

India canceled a scheduled weekly auction of 200 billion rupees ($2.7 billion) of bonds, a move that’s likely to temporarily boost sovereign debt.

The government decided to cancel the auction on review of its cash balances, the central bank said in a statement after close of markets Monday. Some traders had been expecting the decision as revenues improve following an economic rebound from the pandemic.

“Tomorrow the market may open four basis points lower, and will be supported for the next two weeks due to no supply” said Harish Agarwal, a bond trader at FirstRand Bank in Mumbai. “The government has a surplus right now after the advance-tax collections, that’s why they have canceled the auction.”

India Cancels Bond Auction to Calm Yields Amid Global Swings

India had planned record gross market borrowings of about 13.9 trillion rupees for the current fiscal year to March, and about 12 trillion rupees for the next fiscal year. Higher government borrowings and a spike in U.S. Treasury yields spooked the markets, resulting in yields climbing by about 30 basis points since early February.

The yield on benchmark 10-year bonds declined by two basis points to 6.18% on Monday.

They may dip to 6.10% in the short-term, and “then, it all depends on the next year’s borrowing calendar, which is unlikely to give any positive surprises,” said Agarwal.

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