MUMBAI: Indian government bonds dipped slightly in early trading on Tuesday as traders cautiously await the central and state governments’ borrowing calendars, while the rupee hit a record low, adding to the pressure.
The yield on the 10-year benchmark note was at 6.4985% as of 10:00 a.m. IST.
It closed at 6.4885% on Monday.
The rupee slumped to an all-time low of 88.5650 in early trading, pressured by the US visa fee hike, muted foreign equity flows and a pick-up in hedging.
New Delhi’s second-half debt plan and the states’ quarterly borrowing calendar, expected at the end of September, will be crucial triggers as traders have flagged a supply-demand mismatch.
Earlier this month, market participants recommended that the Reserve Bank of India consider reducing the proportion of ultra-long bonds and cutting the size of weekly auctions.
In a meeting last week with state government officials, the RBI also asked states to spread their borrowing across tenures rather than focusing on long-term bonds.
“Bonds should trade in a narrow range till the federal government’s borrowing calendar is out,” a trader at a state-run bank said, adding that the 10-year bond yield may drift between 6.48% and 6.52% till the calendar provides a decisive direction.
India’s Chief Economist Adviser V. Anantha Nageswaran on Monday told news channel CNBC-TV18 that India’s second-half borrowing will be unchanged and that there is room for the 10-year yield to fall.
Separately, Indian states will raise 270 billion rupees ($3.05 billion) through bond sales later in the day, higher than the scheduled amount.
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