E-Paper
Bonds in India sell off as RBI’s support measures disappoint
RBI’s reluctance to announce concrete steps to support the bond market could exacerbate a selloff triggered by the government’s plan to sell 12 trillion rupees ($164 billion) of bonds in the next fiscal year starting April, which comes after a record 13.9 trillion rupees of issuance this year.
Indian sovereign bonds declined as the Reserve Bank of India’s measures to support the bond market fell short of expectations.
The yield on benchmark 10-year note rose eight basis points to 6.15%, the highest since Aug. 28. Governor Shaktikanta Das refrained from announcing a bond purchase calendar to help the market absorb the government’s massive borrowing plan, though as he assured markets that the liquidity stance will continue to be accommodative.
RBI’s reluctance to announce concrete steps to support the bond market could exacerbate a selloff triggered by the government’s plan to sell 12 trillion rupees ($164 billion) of bonds in the next fiscal year starting April, which comes after a record 13.9 trillion rupees of issuance this year.
The central bank’s support kept yields anchored in 2020. It injected 2.7 trillion rupees through open-market bond purchases and infused funds through long-term repos. It also bought state bonds worth 300 billion rupees last year and conducted numerous Operation Twists where it simultaneously bought and sold government bonds.
The government’s plans to deviate from its fiscal consolidation plan, announced in its budget on Monday, is likely to further weigh on bonds.
