Indian bonds fall ahead of debt auction, growth data

MUMBAI: Indian government bonds ended lower on Thursday after a choppy session, as traders looked ahead to the penultimate debt auction of the current financial year and the first GDP growth data under a new series.

The benchmark 6.48% 2035 bond yield ended at 6.6943%, after ending at 6.6777% on Wednesday. Bond yields move inversely to prices.

New Delhi plans to sell 320 billion rupees ($3.52 billion) of the 10-year benchmark 2035 bond on Friday, in what would be the final auction of this note and the penultimate debt sale for the fiscal 2026.

Demand and cut-off yield for the papers are expected to be key market drivers in March.

Meanwhile, ultra-long 30-year and 40-year bonds extended their rally, supported by stronger demand from insurers amid higher flows in recent weeks.

Earlier this week, Reuters reported that the Reserve Bank of India met several market participants and received feedback to either maintain or reduce the share of ultra-long bonds in India’s overall debt supply.

The market has found some relief since the discussion with the central bank, as traders expect the government to accept these recommendations and limit supply.

India will release the October-December GDP data on Friday evening. A Reuters poll predicts the reading at 7.2%.

“From a policy perspective, the strong growth recovery reinforces expectations that the RBI will stay on a prolonged pause. FY27 GDP growth is expected at 7.5% (on the old base),” IDFC First Bank said in a note.

Rates

India’s overnight index swap (OIS) rates witnessed an uptick, due to an increase in paying after the five-year swap was unable to breach a key level.

The one-year OIS rate ended at 5.4975%, while the two-year OIS rate ended at 5.6250. The five-year OIS rate rose 1 bp to end at 6.0525%.