Stellar bond auction sends India yields to lowest since 2009

By Kartik Goyal and Subhadip Sircar
India’s sovereign bonds rallied after the government sold a new 10-year note at a yield lower than market expectations.

The yield on the existing 10-year benchmark securities fell by as much as seven basis points to 5.96% following the debt auction results, their lowest since 2009. The new 10-year bond, which will eventually replace the current benchmark, was sold at 5.79% versus 5.83% forecast in a Bloomberg News survey.

“We are now seeing a fresh round of buying in the longer end after the rally in the shorter segment ran out of juice,” said Anoop Verma, bond trader at DCB Bank Ltd. “The cutoffs have come in quite good and that’s also helping the rally.”

The nation’s sovereign bonds have been supported by debt purchases by the Reserve Bank of India from the secondary market as the government embarked on a record borrowing program in the fiscal year that started April 1.

The government sold Rs 23,000 crore ($3 billion) of bonds at Friday’s auction, compared with plan to sell 190 billion rupees of notes, the RBI said in a statement.