India Bond Yields Little Changed Before RBI's Special OMO Tomorrow

Wednesday,   18-Nov-2020   01:24 PM (IST)

Indian federal government bond yields were little changed in the afternoon session, as traders awaited the central bank’s debt purchase via a so-called special open market operation tomorrow. The benchmark 5.77% 2030 bond changed hands at 99.25 rupees, yielding 5.87% at 1:00 p.m. in Mumbai, against 99.20 rupees and a 5.88% yield yesterday. The Indian rupee was at 74.13 to the dollar against 74.46 in the previous session. The RBI will conduct a special OMO tomorrow, amid assurances of helping to absorb a record government borrowing. It plans to buy bonds worth 100 billion rupees maturing in 2025, 2027 and 2030 and simultaneously sell Treasury Bills maturing in April and May 2021 of a similar amount. The central bank had conducted a special OMO worth the same quantum last week as well. According to the RBI’s data, it had purchased bonds worth 771.32 billion rupees via special OMOs and bought 497.65 billion rupees of bonds via secondary market purchases in July-November. The central bank plans to conduct an auction of 91-, 182- and 364-day treasury bills worth 160 billion rupees today. It will also raise at least 220 billion rupees via bonds on Friday. New Delhi hiked its borrowing by nearly 54% to 12 trillion rupees for this fiscal year that ends Mar. 31. The federal government also announced an additional borrowing amount of 1.10 trillion rupees on behalf of Indian states. Asia’s third largest economy entered a recession for the first time in its history in the first half of this fiscal, according to economists at the central bank. However, the central bank expects to see a rebound in the current quarter if the ongoing revival in activities persists. The Indian economy contracted by a record 23.9% in April-June, and the RBI expects it to shrink by 9.5% in this fiscal year amid weakened economic activities due to the pandemic. India is also the worst pandemic-hit country after the U.S. but fresh daily caseloads have eased since mid-September. The benchmark Brent crude oil contract was trading 0.2% higher at $43.85 per barrel. India imports nearly 85% of its crude oil requirements.