The yield dropped 11 basis points (bps) this week, biggest such move since the week ended Nov. 11. "The brief rally in the bond market after the budget announcement was a normal phenomenon since the borrowing number was below market expectations," said Ashish Parthasarthy, treasurer at HDFC Bank. "In general, the gross borrowing number is large, but then you have to look at other parameters. There will be a generic demand which comes from domestic institutions like banks, insurance companies and provident pension funds." Investor sentiment has improved after the government said it aimed to borrow 15.43 trillion rupees ($187.63 billion) on a gross basis through the sale of bonds in 2023-24.
Market participants had estimated the figure at 16 trillion rupees. Earlier in the day, New Delhi sold 120 billion rupees of a new 10-year bond, at 7.26% cutoff, which was largely in line with estimates. This paper will replace the existing benchmark bond soon. The note traded at a premium in the secondary market, with the yield ending at 7.2415% today. Traders now await U.S. jobs data due later in the day, which will provide more clarity on the Federal Reserve's policy action. The next major focus would be the decision of the Reserve Bank of India's monetary policy committee (MPC) due on Wednesday, when the central bank is widely expected to hike the repo rate by 25 bps followed by a prolonged pause. With inflation now having clearly passed the peak and domestic demand showing signs of softening, the MPC is likely to mark the end of the tightening cycle with a final 25 bps hike on Wednesday, Capital Economics said. "Further, the RBI could lay the groundwork for cuts before the end of the year and start delivering them in early 2024, sooner than the consensus expects." ($1 = 82.2360 Indian rupees) (Reporting by Dharamraj Dhutia; Editing by Sohini Goswami)
