Money & Banking

Bonds decline on heavy government borrowing

Bloomberg April 3 | Updated on April 03, 2020

Indian bonds dropped on concerns about a large government borrowing amid a nationwide lockdown that has diminished trading activity in the country’s financial markets.

The benchmark 10-year bond yield surged as much as 17 basis points to 6.31 per cent on Friday, its biggest intra-day jump since September, with traders getting their first chance to react to the fund-raising due to the holidays on Wednesday and Thursday. The rupee declined 0.5 per cent to 75.9125 per dollar.

The government said on Tuesday it will sell $64.5 billion of bonds in the six months to September. That, along with treasury bill sales, translate to a weekly supply of at least ₹45,000 crore, versus ₹37,000 crore in the year-ago period. There is concern that the auctions may not lure enough demand as volumes dwindle because of the emergency restrictions.

“The market is jittery about the fact that it faces a very heavy weekly bond sales calendar,” said Debendra Dash, a Mumbai-based fixed-income trader at AU Small Finance Bank. “Markets will demand higher yields at every auction unless the central bank doesn’t come up with its open-market purchases.”

Published on April 03, 2020

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