India bonds sell off on government’s record borrowing plan

MUMBAI: Indian bonds fell sharply a day after the federal budget, with the 10-year benchmark bond yield spiking to its highest in nearly a year, as record-high government borrowings dampened the already weak investor sentiment.

The benchmark 6.48% 2035 bond yield jumped 8 basis points to 6.78% on Monday, its highest since March, after the government announced it will borrow a gross of 17.2 trillion rupees ($187.5 billion) in the next fiscal year.

Why it’s important

The 10-year government bond yield, which drives the broader yield curve, is crucial for deciding borrowing costs across the economy. Elevated yields raise funding costs for states and companies, which are priced off government bonds.

Higher yields also make borrowing more expensive for the government and complicate the task for the central bank, which has cut policy rates to support growth. Bond yields move inversely to prices.

India’s fiscal year runs April through March.