India Bonds Rise On Lower U.S. Yields, Debt Supply Caps Gains

Friday,   08-Mar-2019   10:10 AM (IST)

Indian government bonds added modest gains in thin-volume early session, tracking lower U.S. treasury yields, while fresh supply at home via a weekly debt auction capped further rise. The benchmark 7.17% bond maturing in 2028 changed hands at 97.48 rupees, yielding 7.56% at 10:00 a.m. in Mumbai, against 97.38 rupees, yielding 7.58%, yesterday. India’s federal government will raise 120 billion rupees via sale of four bonds today and the auction includes 40 billion rupees of the 7.26% 2029 bond. This note was trading at 99.14 rupees, yielding 7.38% against 99.11 rupees and 7.39% yield at close yesterday. U.S. Treasury prices rose yesterday, with 10-year yield falling five basis points to end at 2.64%, on increased safe haven demand after European Central Bank cut is growth forecast to 1.1% in 2019 from 1.7% earlier, leading to a selloff in global equities as well. Underlying sentiment remains cautious as the government will further raise 180 billion rupees each in the following two weeks, the highest quantum for a weekly auction since January 2018, raising doubts about investor appetite during the last month of the fiscal year. India also aims to raise 7.10 trillion rupees via bonds in the next fiscal year that starts Apr 1. Market also awaits February retail inflation data, due for release on Mar. 12. A Reuters poll expects the reading at 2.43%. India’s Monetary Policy Committee had unexpectedly cut rates by 25 basis points last month as it expects inflation to stay below target for the next year. Bets of another rate cut also gained strength as the Indian economy grew 6.6% in October-December, the slowest pace since quarter ended June 2017, and against 7% growth in the previous quarter. India also cut its estimate for economic growth in this fiscal to 7% from previous estimate of 7.2%.