Underwriters save 10-year bond sale in India amid supply problems

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The underwriters rescued a sale of Indian sovereign bonds, the third such case in five auctions, underscoring growing concern about the increased supply of debt amidst tight public finances.

Primary traders bought 179.7 billion rupees ($ 2.4 billion) of the possible 180 billion rupees of the 10-year benchmark bond, the central bank said in a statement on Friday. The Reserve Bank of India sold the bond at a threshold yield of 6.0214% versus 6.08% estimated in a Bloomberg survey. In total, the RBI sold 300 billion rupees of bonds through the tenors.

Still, bonds won as traders interpreted it as a signal of RBI’s discomfort with rising yields. The 10-year yield closed down one basis point at 6.04% after hitting 6.08% in the session.

“RBI is signaling again that the Das put is still in play,” said Pankaj Pathak, fixed income fund manager at Quantum Asset Management Ltd. in Mumbai. “RBI Slows Down on Higher Yields.”

Record loan

The demand for higher yields underscores concerns that the supply of federal and state debt could be larger than expected. The government is set to surpass its already improved annual borrowing target of Rs 12 trillion after the world‘s largest foreclosure decimates its revenue-raising targets, Bloomberg News reported citing people familiar with the matter.

The auction bailout comes days after the central bank unveiled a series of measures to cap rising yields, including more twists at the Federal Reserve and giving banks more leeway to hold government debt without having to to score losses. Still, benchmark yields are up eleven basis points this week.

Supply worries have been exacerbated by concerns over a resurgence in consumer prices, pushing back bets on rate cuts. Data due on Monday should show inflation topped 6.9% in August, remaining above the central bank’s comfort zone.

This story was posted from an agency feed with no text editing.

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