MUMBAI: Indian government bond yields are expected to dip on the last trading day of the financial year after the government announced a lower-than-anticipated borrowing plan for the first half of the next fiscal.
The benchmark 10-year bond yield is likely to move between 6.56% and 6.61%, a trader with a private bank said, compared with its previous close of 6.6022.
“Bond markets should react positively to the borrowing calendar as the supply is on the lower side for the first half, and yields could again resume their decline after ending flattish yesterday,” the trader said.
Yields move inversely to bond prices. India plans to raise 8 trillion rupees ($93.38 billion) through bond sales between April and September, amounting to 54% of the estimated gross borrowing for the upcoming financial year.
India bond yields a tad down with focus on government’s borrowing plan
The market had expected the borrowing to be at 56%-59% of the 14.82 trillion-rupee target for the fiscal year starting on April 1.
The government has, however, raised the size of every auction of the benchmark paper to 300 billion rupees from 220 billion rupees in the October-March period.
“The heavy supply in the belly of the curve is expected to weigh on the 10-15-year bucket. We expect the benchmark 10-year yield to trade in the range of 6.35%-6.65% in April-September,” Upasna Bhardwaj, chief economist at Kotak Mahindra Bank, said.
Meanwhile, sentiment remains positive as market participants expect the central bank to continue its liquidity infusion into the banking system as well as reduce interest rates one more time at its next policy meeting on April 9.
The Reserve Bank of India will meet some market participants next week to discuss its liquidity management framework, and could announce changes at the April meeting, six sources familiar with the matter said on Thursday.
Overnight indexed swap (OIS) markets have started pricing in far more aggressive rate cuts by RBI than previously anticipated.
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