India partially cancels debt sale for first time in a year as rates spike

MUMBAI: In what market participants are seeing as an early indication from Indian authorities on interest rates, the central bank partially canceled an auction of shorter duration government security to curb any further spike in bond yields, traders said on Friday.

Reserve Bank of India accepted bids worth only 45.06 billion rupees ($471.12 million) for the 6.20% 2029 bond, just over 40% of the planned borrowing in the paper of 110 billion rupees.

RBI sold seven-year bond at slightly higher-than-expected yield, while a new 30-year paper was auctioned at a cutoff yield that was in line with estimates.

The three-year or 6.20% 2029 bond yield was dealt at 6.4566%, up 25 basis points in last four weeks since it was issued; Reuters poll had pegged cutoff at 6.45%.

India debt investors call for higher short-term borrowing to absorb excess cash, sources say

“This could be a strong signal that market is factoring in overly aggressive pessimism in terms of interest rate expectations and could help soothe sentiment for the day,” trader with a state-run bank says.

“Had they gone for the complete target, yield could have tested the territory of 6.50%,” the trader added.

Fresh military escalation in the Middle East has pushed oil prices higher, heaping upward pressure on yields that have been rising in recent weeks.

Latest U.S. economic data strengthened bets of a Federal Reserve rate hike next, week pushing 10-year Treasury yield to cusp of 5%.

RBI had last canceled auction of a security in October 2025 as investors demanded much higher yields.