Indian government bond yields remained stable at the weekend as traders exercised caution in the absence of decisive market catalysts. The benchmark 10-year yield ended the week at 7.06 per cent on March 1, 2024, marginally down from 7.07 per cent in the previous week. The slight decline on Friday is attributed to robust domestic economic indicators and fresh economic data from the United States. India's economy surged by 8.4 per cent in the October-December quarter, marking its fastest growth in the last eighteen months. The growth that surpassed market expectations of 6.6 per cent and accelerated from 7.6 per cent in the preceding quarter was driven by manufacturing and construction activities. Consequently, India revised its growth forecast for the current fiscal year to 7.6 per cent from 7.3 per cent.
In February, the Reserve Bank of India (RBI) maintained repo rates at 6.50 per cent for the sixth consecutive time, citing a target of 4 per cent inflation. With the robust economic growth figures, and India's real policy rate edging towards restrictive territory, the monetary policy committee is unlikely to change this repo rate soon.
Meanwhile, 11 state governments plan to auction securities worth Rs 27,981 crore via the Core Banking Solution (E-Kuber) system on March 5, 2024.
The indicative yield for T-bills stands at 6.95 per cent, 7.16 per cent, and 7.11 per cent for three-month, six-month, and 364-day durations, respectively. In the 1-2 year tenure, the 7.72% GS 2025 show a yield of 7.03 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 yields of 7.05 and 7.06 per cent, respectively.
LIC Housing Finance raised 10.05 billion rupees through bonds and several other NBFCs like Sundaram Finance Ltd, Bajaj Housing and Tata Cap also joined the bandwagon with smaller issues.
After RBI's caution regarding over-reliance on bank loans and increased risk weights on such loans, Non-Banking Financial Companies (NBFCs) have turned to retail issuance of debentures to diversify funding sources.
Foreign investors continue buying spree of Indian government bonds ahead of their scheduled inclusion in JPMorgan's emerging market debt index in June. The foreign demand for Indian bonds has significantly increased since September 2023 and this is further supported by decreasing bond supply, proving especially beneficial for longer-maturity bonds.
