The expectations are for the 10-year yield to drop further to
5.75%, a level last seen in July, according to a median estimate of 15 traders
surveyed by Bloomberg.
India’s sovereign
bonds are turning a corner as a supply overhang dissipates following a raft
of liquidity measures from the central bank. Early signs of economic revival
are also spurring hopes of an improvement in government finances.
The yield on
India’s benchmark 10-year bond fell about 13 basis points over the past month
to 5.9%, making it Asia’s best performer, with the bulk of its decline coming
in after the Reserve
Bank of India announced steps including doubling the size of its bond
purchases in a policy address last week.
The expectations
are for the 10-year yield to drop further to 5.75%, a level last seen in July,
according to a median estimate of 15 traders surveyed by Bloomberg. That’s
compared to forecasts of around 6% just two weeks ago amid concern that the
administration may further hike its 12 trillion rupees ($163.8 billion) bond
sale target for the year.
“The RBI in one
shot has cleared all the uncertainty about the heavy borrowing program and we
could see bonds gaining from here on,” said Anoop Verma, senior vice president
at DCB Bank Ltd. in Mumbai.
Bonds were primed
for gains even before the RBI announcement as data showed a manufacturing index
rose to the highest in more than eight years, while goods and services revenues
improved, spurring optimism the government may not increase its borrowing
target further after a 54% hike in May. The government said in late September
it will leave its October to March issuance plan unchanged at 4.34 trillion
rupees.
However, the RBI
still faced ire from bond traders for not doing enough to shoulder the
government’s unprecedented debt issuance.
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