India's bond yield closed marginally higher at 7.2914 per cent on December 1, 2023, marking a second consecutive weekly increase amid a consistent supply of debt that impacted investors' interest. The week saw rise of 2 basis points, following the increase of 5 bps in the previous week.
Continuous debt issuance, particularly from states, created market fatigue, that slowed down the rise in yields despite falling US yields and no significant negative triggers. Despite India's stronger-than-expected 7.6 per cent GDP growth in the July-September quarter, traders were not very enthusiastic at the weekend.
Meanwhile, November witnessed foreign inflows of Rs.127.2 billion into Indian government bonds, the highest in six years, ahead of the securities being included in JPMorgan's emerging market index next year.
Centre raised Rs 30,000 crore through bond sales, including Rs 13,000 crore in 10-year papers. The Reserve Bank of India set the cut-off on the 10-year paper at 99.23 rupees reportedly higher than market expectations. Also, 10 state Governments have offered to sell securities by way of auction, for an aggregate amount of Rs 15,132 crore. The auction will be conducted via RBI's E-Kuber system on December 5, 2023.
Further, corporate bond issuances rebounded in November after a drop in October as the market recovered from doubts about the US Federal Reserve's stance. Reportedly, companies raised Rs 82,590 crore by November 28, up from Rs 33,148 crore in October.
Market speculations hint at more corporate bond issuances before the RBI policy next week. Following recent RBI circulars on risk-weighting many Public Sector Undertakings and corporates including Power Finance Corporation, REC, and Small Industries Development Bank of India had hit the bond market.
The indicative yield for T-bills stands at 6.95 per cent, 7.15 per cent, and 7.14 per cent for three-month, six-month, and 364-day durations, respectively. In the 1 to 2-year tenure, the 7.72% GS 2025 shows a yield of 7.22 per cent.
Moving to longer tenures, both the 7.37% GS 2028 (4 to 5-year tenure) and the 7.18% GS 2033 (9 to 10-year range) also show a 7.26 and 7.28 per cent yield respectively. The indicative yields for all the above-mentioned instruments had inched p higher compared to the previous week.
Says Vishal Goenka, Co-Founder, of IndiaBonds.com, " Last week, the government bond market traded in a 5 bps range slightly wider with the benchmark 10y G-Sec ending the week at 7.29 per cent. Corporate bond issuance continued and November saw a big rebound as corporates tapped the relatively stable interest rate markets. NBFCs quoted about 5 to 10 bps wider in anticipation of more supply post the recent RBI capital changes for unsecured lending."
"GDP for Q3 came at a strong 7.6 per cent vs consensus view of 6.8 per cent denoting some inflation pressures may remain. All eyes on RBI policy on December 8, 2023, where we anticipate the MPC to keep interest rates unchanged and also highlight their focus on forward inflation to determine future course of action," Goenka said.
