Finance ministry to meet primary dealers before Rs 6 trillion-bond sale

The finance ministry wants to seek the views of market participants about how it can conduct the $92.9 billion bond sale smoothly, and talks may include what maturities would be better received, said two primary dealers.

The finance ministry has called for a meeting of primary dealers in New Delhi on Wednesday, to discuss its near record bond-sale program for the new fiscal year, according to people with knowledge of the matter.

The yield on the benchmark 10-year government bond was trading little changed at 7.61%, paring an earlier advance of two basis points. (Dhiraj Singh/Bloomberg)

The ministry wants to seek the views of market participants about how it can conduct the 6.06 trillion-rupee ($92.9 billion) program smoothly, and talks may include what maturities would be better received, said two primary dealers. A government official said the meeting would be used to gauge the mood of the market and the appetite for bonds. All the people asked not to be named as they aren’t authorized to speak publicly.

The RBI cut back on the size of several bond sales and cancelled others in December and January as a rout in debt markets deepened. State-run banks, the biggest holders of the securities, have stayed away after incurring losses amid the selloff.

“The bond market is going through a stressful phase and the government’s bond sales, in the absence of supporting measures, will make things even more difficult,” said Anoop Verma, vice president for treasury at DCB Bank in Mumbai. “Policy makers will have to soon take steps to improve the market sentiment to ensure that the first few auctions sail through. Otherwise, we may see yields hitting 8 percent soon.”

Indian bonds have slumped for seven straight months, the longest stretch in two decades. A rising debt supply, climbing global yields, faster inflation and the prospect of higher interest rates have all helped sour sentiment.