MUMBAI: Indian federal bond yields edged lower on Monday aided by hopes of lesser short-term borrowing by the government and a lack of supply this week, with a drop in US yields also supporting sentiment.
India's central bank on Saturday announced new short-term borrowing limits for the federal government, saying the maximum it can borrow under the ways and means advances (WMA) is 300 billion rupees for April 1 to April 20 and 450 billion rupees for the April 21 to June 30 period.
"The fresh limits under WMA and the absence of a bond sale this week are both positive bonds," said Anoop Verma, an associate vice president with Development Credit Bank.
The government usually borrows from the Reserve Bank of India under the WMA when it does not have enough funds. The new limits are seen as positive for the bond market as it would mean lesser issuance of cash management bills, dealers said.
"The fresh WMA borrowing limits mean there is unlikely to be any fresh issuance of cash management bills. The government has, anyway, exhausted its limits for additional market borrowing this year, last week itself," a dealer with a foreign bank said.
The government had last week sold 200 billion rupees ($4.5 billion) worth of cash management bills.
Yields on the most-traded 10-year 7.80 percent 2021 bond and the second most-traded 8.08 percent 2022 bond were both down 2 basis points at 8.04 percent and 8.22 percent, respectively. The market was closed last Friday for Good Friday.
Total volumes were a moderate 19.50 billion rupees on the central bank's electronic trading platform.
The benchmark 5-year swap rate was down 2 basis points at 8.24 percent while the one-year swap rate was 1 basis point lower at 7.79 percent.
"Some position adjustments ahead of the policy are being seen today. Swap market was paid, so (seeing) squaring off of the positions. Also, the absence of a bond sale this week is keeping sentiment bullish," said a senior dealer with a foreign bank.
Market is largely expecting a 25 basis points increase in key rates at the central bank's annual monetary policy on May 3.
US Treasuries were supported in Asia on Monday as market players look to the US Federal Reserve for signs it will not rush to shrink its huge balance sheet at a policy-setting meeting this week, though buying was kept to a minimum before a series of auctions.
The yield on the 10-year US Treasuries stood at 3.40 percent, little changed from late Thursday trade before the Easter holiday.
Comments
Comments are closed.