MUMBAI: Indian government bond yields inched lower in early deals on Wednesday with the focus on the government’s borrowing plan for the next six months, while the benchmark bond yield was glued to the key 6.62% level.
The benchmark 10-year bond yield was at 6.6277% as of 10:10 a.m. IST, compared with the previous close of 6.6370%. The 10-year yield has stayed close to its lowest level in three years.
“Any decisive break below 6.62% for the benchmark bond yield, will depend only on the amount of frontloading and the issuance pattern for the next six months,” a trader with a state-run bank said.
India’s finance ministry and central bank officials will meet on Wednesday to decide the country’s market borrowing plan for April to September, two sources told Reuters on Tuesday.
The federal government plans to borrow a gross amount of 14.82 trillion rupees ($172.90 billion) through the sale of bonds in the next financial year which starts on April 1.
The central government raised 14.01 trillion rupees through the sale of bonds in the current financial year, while states raised around 10.50 trillion rupees, with a bulk of the supply hitting in the January-March quarter.
Indian bond yields hold steady ahead of final state debt sale for fiscal year
At a meeting with central bank officials earlier this month, investors suggested the government lower the supply of ultra-long debt in the next financial year.
Most investors suggested cutting down the supply of above 30-year bonds to around 34%-35% of the total borrowing, due to weak demand for such papers towards the end of this year’s auction cycle.
Yields have stayed benign on bond purchases by the Reserve Bank of India as well as rising bets of monetary policy easing in the next financial year.
The RBI has bought bonds worth 2.83 trillion rupees on a net basis since mid-January and infused another 4 trillion rupees of liquidity into the banking system through FX swaps and early-April maturity repos.
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