India's benchmark bond yields ended little changed on Friday ahead of the release of the amount to be borrowed via treasury bills which would help determine how the government plans to finance its extra borrowing.
Traders remain optimistic the government will finance additional borrowing by issuing short-term treasury bills to meet its ambitious 5.3 percent fiscal deficit target, and not the longer-dated securities that would have a negative impact on bond markets.
Bond yields have dropped 3 basis points this week to hit a five-month low, on growing expectations for a rate cut in January and comfort from the central bank's continued open market operations in bonds.
"A higher T-bill issuance will suggest there will be no extra borrowing through dated securities," said a foreign bank dealer.
The 10-year benchmark bond yield ended at 8.11 percent, unchanged from Thursday when it had touched 8.09 percent, its lowest since July 26. Rate cut hopes have strengthened after the central bank shifted its focus to protecting growth, following a soft November inflation number, and reiterated its guidance of further policy easing in the March quarter earlier this month.
"There is nothing negative now. On one hand, inflation and growth are lower than expected, and on the other, net supply is also low. The market is certain of a rate cut in January and is slowly building in a 50 basis point cut," said another dealer at a primary dealership firm.
Trading volumes were at 272.05 billion rupees ($5 billion), higher than the 200 billion rupees in a usual session.
India's short-end 1-year rate and the long-end 5-year OIS rate closed down 1 basis point at 7.62 percent and 7.14 percent, respectively.
Comments
Comments are closed.