India cancels benchmark bond sale in yet another yield signal

By Kartik Goyal

The central bank didn’t accept any bids for the benchmark 10-year bond at the weekly auction, in another sign that authorities want to keep yields in a tight range.

The monetary authority got 276 bids worth 246.4 billion rupees ($3.4 billion), almost triple the amount the Reserve Bank of India had planned to sell of the 5.85 per cent, 2030 notes. It sold 229.8 billion rupees of other bonds at the weekly sale, the central bank said in a statement. It had planned to auction 280 billion rupees of securities.


Sovereign bonds, which were trading lower before the auction results, advanced after the RBI rejected bids. The yield on benchmark 10-year note fell as much as seven basis points to 5.88 per cent and ended the day three points lower. Yields had earlier climbed amid higher oil prices.

“The RBI is clearly signaling that it doesn’t want the market to take the yields on the 10-year higher” said Vijay Sharma, executive vice president for fixed-income at PNB Gilts Ltd. And, if the global situation prevails the way it has been in the past few weeks, the RBI will not hesitate to raise its intervention to keep yields capped, he said.

The RBI immediately followed by announcing an Operation Twist for 100 billion rupees, where it plans to buy longer dated bonds and sell shorter-maturity notes on Dec. 30.

The monetary authority had rejected bids at auctions in Aug.-September this year also as higher yields threatened to raise the government’s borrowing costs.