India bonds steady as debt switch plan fails to spur moves

Indian government bonds were largely unchanged in early deals on Wednesday, even after the government announced another debt switch that would lower gross borrowing for the next fiscal year, while traders looked ahead to upcoming debt supply.

The benchmark 6.5% 2035 bond yield was at 6.7% as of ‌10:20 a.m. ⁠IST, after ⁠closing at 6.6% on Tuesday. The yield has declined by 10 basis points over the last six sessions. Bond yields move inversely to prices.

New Delhi will buy back bonds worth 250 billion rupees ($2.76 billion) maturing in fiscal year 2027 from the market and sell longer-duration papers in a switch operation next Monday.


This comes after the government switched ⁠similar maturity papers ‌with the central bank last week for 755 billion rupees. Together, the switch operations will lower the gross borrowing figure ⁠by 1 trillion rupees for the next fiscal.

"We are unlikely to see any major action today as traders will avoid entering before a holiday, and would also want to look at demand at auction" a trader with a primary dealership said.

The Indian debt market will be closed on Thursday for a holiday.

Earlier this month, India announced a record gross borrowing of 17.20 trillion rupees ‌for the next financial year, which pushed up yields. However, the Reserve Bank of India has maintained sufficient liquidity in the banking system, helping soften the impact ⁠and support prices over recent sessions.

Investors now await the government's 330 billion-rupee bond sale on Friday, which includes the three-, seven- and 30-year papers.

RATES

India's overnight index swap (OIS) rates saw low activity, with no trades at the shorter-end, while the longer-end witnessed some uptick.

The one-year OIS rate ended at 5.5%, while the two-year rate closed at 5.6% on Tuesday. The five-year OIS rate was 2 bps higher at 6%.

($1 = 90.6460 Indian rupees)