INDIA BONDS-India bond yields flattish as year-end demand offsets H1 borrowing calendar

By Dharamraj Dhutia

MUMBAI, March 31 (Reuters) – Indian government bond yields were largely unchanged early on Friday, as valuation-led demand on the last day of the financial year offset the impact of the April-September borrowing calendar.

The 10-year benchmark 7.26% 2032 bond yield IN072632G=CC was at 7.2829% as of 10:00 a.m. IST, after closing at 7.2897% on Wednesday. Indian markets were shut on Thursday.

“Borrowing is slightly negative for the duration, which led to some selling at open, but there is protection of levels for fiscal year end closing,” a trader with a state-run bank said.

India’s federal government plans to borrow 8.88 trillion rupees ($108.15 billion) – slightly above expectations – via bonds in April-September.

The planned borrowing constitutes about 57.6% of the total 15.43 trillion rupees planned, the government said on Wednesday.

Bond supply combined with the possibility that the Reserve Bank of India (RBI) is approaching the end of the rate hike cycle, favours the shorter-end of the bond yield curve over the longer end, said Madhavi Arora, economist at Emkay Global.

Market participants also said purchases from mutual funds and insurance companies ahead of tax tweaks that will be effective from April 1 may support bonds.

Funds net bought close to 50 billion rupees of government debt on Wednesday, while “others” category, which comprises of insurance companies, has bought over 100 billion rupees of bonds in three sessions of this week.

Traders will now focus on the RBI’s monetary policy decision due on April 6, wherein the central bank is expected to raise interest rate by 25 basis points and then pause for the rest of the year, according to a Reuters poll of economists.

The central bank has so far raised the repo rate by 250 bps to 6.50% in the current financial year to fight inflation.

($1 = 82.1100 Indian rupees)

(Reporting by Dharamraj Dhutia; Editing by Varun H K)

((Dharamraj.dhutia@tr.com))

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