Indian government bonds
rallied in early trade on Friday, as expectations of a record
central bank surplus transfer overshadowed rate-hike concerns.
The Reserve Bank of India’s surplus transfer, expected to be
announced after market hours, is pegged at ₹2,90,000 crore to ₹3,20,000 crore($33.29 billion), according to a Reuters
poll.
A hefty dividend would help government finances at a time
when they are likely to come under pressure from the Iran
war-led energy shock, traders said.
BMI, a Fitch company, said it is maintaining its forecast
for the federal government’s fiscal deficit at 4.5% of GDP,
above the government’s 4.3% target, while flagging increased
upside risks.
India’s 10-year bond yield has risen about 40 basis points
since the start of the Iran war, with a knock-on impact on
corporate debt yields, which have risen to multi-year highs,
prompting firms to turn to floating-rate bonds.
On Friday, the benchmark 6.48% 2035 bond yield
slipped 3.7 basis points to 7.0765% by 11:05 a.m.
IST. Bond prices move inversely to yields.
Yields had surged a day earlier after Bloomberg News
reported that the RBI is considering all available options to
stabilize the rupee, including raising interest rates.
New Delhi is selling ₹32,000 crores of bonds later in
the day, which would test investor appetite.
On the global front, oil prices and Treasuries were
rangebound, with the benchmark Brent crude contract at $104 per
barrel and the 10-year Treasury yield around 4.56%.
RATES
India’s overnight index swap rates eased as RBI dividend
optimism spurred receiving.
The one-year swap was down 8 bps at
6.2750%, while the two-year rate fell 7.25 bps to 6.4825%. The
five-year rate fell 6.75 bps to 6.7750%.