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India Bond Yields Stay Lower On Value Buying Ahead Of Quarter-End

Monday,   29-Jun-2020   01:23 PM (IST)

Indian government bond yields were lower in the afternoon session, on value buying ahead of the quarter-end and also amid bets that the central bank may announce bond supportive measures soon. The benchmark 5.79% bond maturing in 2030 changed hands at 99.17 rupees, yielding 5.90% at 1:00 p.m. in Mumbai, against 99.08 rupees and a 5.91% yield at the previous close. The Indian rupee was at 75.60 to the dollar against 75.65 in the previous session. The Indian benchmark yield rose 11 basis points in the last two weeks as absence of supportive steps from the central bank hurt appetite. Calls for central bank intervention have risen after New Delhi hiked its borrowing for this fiscal year, and is expected to do so again in the second half of the year in the wake of the coronavirus pandemic. The government has hiked its annual borrowing target by 54% to a record high of 12 trillion rupees this year. The Reserve Bank of India is widely expected to conduct quantum-heavy open market operations or directly monetise debt. The RBI has yet to conduct OMO auctions so far this year. India is likely to consider direct monetisation of fiscal deficit in the second half of this financial year, Business Standard reported, citing sources. A top government official was cited as saying that such a move is a “high possibility.” Authorities will get a clearer picture of the economic damage of the coronavirus outbreak in the latter half of the year and further resources may be needed to support the economy, the official said, according to the newspaper. Economic activity is slowly picking up as Asia’s third-largest economy emerges from a months-long lockdown. However, the number of reported coronavirus cases in the country has risen to 548,318, resulting in 16,475 deaths. India’s economy will post a sharp recovery beyond this year as the novel coronavirus pandemic threatens fiscal projections, N.K. Singh, chairman of the country’s 15th Finance Commission, said last week. The commission is working on a roadmap for sharing of resources between the federal and state governments till financial year 2026.