India bonds slip as wary traders eye weekly debt sale

MUMBAI:  Indian government bonds fell on Thursday ahead of a debt sale, which is likely to test a market where appetite has taken a hit despite aggressive debt purchases by the central bank.

The benchmark 10-year bond yield closed at 6.6290%, against the previous close of 6.6105%. Yields move inversely to bond prices.

The Reserve Bank of India has bought 2 trillion rupees ($22.3 billion) of bonds since last month and is set to purchase bonds worth another 1 trillion rupees through January 22.

However, the central bank’s choice of buying less-traded bonds at these operations has dented overall demand as has hefty upcoming supply from state governments.

New Delhi will sell 290 billion rupees of 15-year and 40-year bonds on Friday.

Traders also await inflation data, due on Monday, for cues on monetary policy, after India projected fiscal year GDP growth at 7.4%.

“The RBI is expected to maintain easy liquidity and keep rates relatively lower rather than higher,” Abhishek Bisen, fixed income head at Kotak Mutual Fund, said, adding he expects inflation to remain benign and growth to falter in coming quarters.

Traders also await inclusion of Indian bonds in Bloomberg Aggregate Index. The announcement is due as early as next week.

RATES

India’s overnight index swap rates rose on Thursday, in line with bond yields.

The one-year OIS ended 1.5 bps higher at 5.48%, while the two-year OIS rate rose 2 bps to 5.57%.

The five-year OIS rate was also up 2 bps at 5.9375%.