Indian bonds rallied after Prime Minister Narendra Modi’s government kept its borrowing in line with estimates, providing relief to a market that has endured three months of declines.

Ten-year yields slid as much as 11 basis points to 6.49 per cent on Monday, before trading at 6.51 per cent at 10:20 AM in Mumbai. On Friday, benchmark bonds capped a third straight month of declines.

The Centre will borrow ₹7,80,000 crore ($109 billion) in the year starting April 1, in line with estimates compiled by Bloomberg News . Debt sales for the current fiscal were maintained at ₹7,10,000 crore, quelling fears of the government taking on an extra borrowing of as much as ₹50,000 crore.

“The market was scared before the Budget, but no negative surprise has come our way,” said Vijay Sharma, executive vice president for fixed-income at PNB Gilts Ltd, in New Delhi. “The Budget and the fact the RBI has been trying its best to support the yields should be bond-positive in the coming days.”

Further, the move to open up of some sovereign bonds to full overseas ownership — a likely precursor to listing Indian debt in global indexes — is good news to a market where benchmark 10-year yields rose 15 basis points in the November-January period on fears the government will blow out the budget to revive economic growth.

Overseas investors will also be allowed to own 15 per cent of corporate debt from 9 per cent currently.

“We could see a positive mood in the bond market in the short-term,” said Mahendra Jajoo, head of fixed income at Mirae Asset Global Investments Co in Mumbai. “For the longer term, the market will still have to depend on the central bank’s open market debt purchases to support bonds.” The Reserve Bank of India has been buying longer bonds and selling very-short end ones since mid-December to pull down term spreads and spur lending.

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