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India Bond Yields Edge Higher Ahead Of Debt Auction Result

Friday,   14-Jan-2022   01:46 PM (IST)

India’s sovereign bond yields were higher in afternoon session, as traders awaited the cutoff for the new 10-year note at an auction today that may see another devolvement. The benchmark 6.10% bond maturing in 2031 was at 96.68 rupees, yielding 6.58% as of 1:00 p.m. in Mumbai, from 96.78 rupees, yielding 6.56%, yesterday. The Indian rupee was at 74.12 to the dollar compared with 73.88 yesterday. New Delhi is selling 240 billion rupees of bonds today, including a new security maturing in 2032 for 130 billion rupees. Traders expect the cut-off yield on this bond to be at 6.54%. The note was last dealt at a yield of 6.53% in the so-called ‘when issued’ market, which trades bonds ahead of the issuance. New Delhi aims to borrow a gross 12.05 trillion rupees through bonds in this fiscal to March. ANZ expects the government’s debt borrowing to be between 12 trillion rupees to 13 trillion rupees for the next fiscal year, while Barclays pegs the figure at a record 16 trillion rupees, amid the need for a larger fiscal push. Finance Minister is likely to detail the federal budget for the next year on Feb. 1. India’s pandemic-stricken economy is currently facing headwinds from the highly-contagious Omicron variant of the coronavirus. Active cases have jumped by nearly 14 times in last two weeks to reach to their highest level in seven months, prompting several states to tighten restrictions, leading to a disruption in economic activity. ICICI Securities Primary Dealership has cut India’s growth forecast for the current financial year by 50 basis points to 9.5%, accounting for some loss in growth momentum in third quarter and impact of Omicron in the fourth quarter. New Delhi expects the economy to clock a 9.2% annual growth this fiscal year. Meanwhile, the Reserve Bank of India held a 14-day variable rate reverse repo auction for five trillion rupees today, lower than 7.5 trillion rupees for a similar-tenor operation on Dec. 31. The central bank skipped the liquidity absorbing auction yesterday, which traders saw as a temporary pause in the central bank’s otherwise aggressive cash withdrawal from lenders. The central bank has been removing surplus cash with lenders via the variable reverse repo operations since January 2020. In the recent past, response from lenders for these auctions has been underwhelming. The benchmark Brent crude futures were trading little changed at $84.5 a barrel. India imports about 85% of its crude oil requirements. A rise in global oil prices stokes inflation.