The 10-year bonds gained on speculation yields at the highest level in three weeks attracted investors
Banks and securities companies may have increased purchases as benchmark yields increased by a record 92 basis points last month. Yields had surged after the central bank refrained from cutting interest rates on January 27 and the government’s spending plans fueled concern debt supply will increase. India sold a new 10-year bond at 6.05 per cent on January 30.
The yield on the 6.05 per cent note due January 2019 fell 1 basis point to 5.90 per cent at the 5:30 pm close in Mumbai, according to the central bank’s trading system. The price rose 0.10, or 10 paise per 100-rupee face amount, to 101.10. A basis point is 0.01 percentage point.
India raised its borrowing target for the year ending March 31 to more than Rs 2 trillion ($40.9 billion), from Rs 1.45 trillion set in its budget for the period. The government hasn’t yet decided on any additional amount it may need to borrow, said an official on condition of anonymity on January 30.
The federal government’s budget deficit in the first nine months of the financial year was already 163.8 per cent of the annual target, it said last week. The shortfall was 2.8 per cent of GDP last year.
The cost of five-year swaps, or derivative contracts used to guard against rate fluctuations, was little changed. The rate, a fixed payment made to receive floating rates, was at 4.84 per cent, versus 4.83 per cent on January 30.
