The benchmark 10-year government bond dipped on May 15, 2024, and since then remained stable till the weekend. Currently, the 10-year benchmark yield stands at 7.08 per cent down from last week's close of 7.16 per cent.
Reserve Bank of India announced a government buyback of dated securities worth Rs 60,000 crore through an auction on May 21, 2024. The upcoming auctioned securities include 7.35% GS 2024, 8.40% GS 2024, 9.15% GS 2024 and an FRB 2024 maturing on November 7, 2024. The auction will be conducted electronically via the Reserve Bank of India's Core Banking Solution (E-Kuber) system on May 21, 2024, and settlement is scheduled for the next day.
On the same day, five state governments announced the auction of securities to raise a total of Rs 5,200 crore through the Core Banking Solution (E-Kuber) system.
Government borrowing costs may remain elevated shortly due to delays in rate cuts across the world due to uncertainty surrounding the inflation trajectory, according to Moneycontrol. While bond yields were expected to fall after the government bought back securities after around six years to ease liquidity, the global market conditions deemed it otherwise.
The indicative yield for T-bills currently stands at 6.98 per cent, 7.08 per cent, and 7.07 per cent for three-month, six-month, and 364-day durations, respectively. In the 1-2 year tenure, the 5.63% GS 2026 indicates a yield of 7.04 per cent.
Moving on to longer tenures, the 7.37% GS 2028 (4-5 year tenure) and the 7.18% GS 2033 (9-10 year range) show indicative yields of 7.07 per cent and 7.08 per cent.
Meanwhile, in just one week since the auction, the 7.10% 2034 government bond supplanted the 7.18% 2033 bond as the new benchmark. The 2034 bond saw 1,362 trades worth Rs 19,694 crore, surpassing the older bond’s Rs 10,542 crore through 969 trades, as per data from the Clearing Corporation of India Limited.
The Reserve Bank of India (RBI) repurchased bonds worth Rs 10,512.99 crore from a Rs 40,000 crore offer last week, rejecting most bids. The Government is coming with more buyback plans as indicated by Finance Minister Nirmala Sitharaman on May 9, 2024, as a support to the RBI balance sheet.
Indicating a cooling trend in US inflation data, the 10-year US yield inched below 4.35 per cent, this week prompting market expectations of Federal Reserve rate cuts this year. Market experts continue to predict substantial inflows in the debt market owing to India’s bonds getting included in the JPMorgan GBI-EM in June and Bloomberg’s Emerging Market Local Currency Government Index in January 2025.
