Indian government bond yields remained stable as on January 19, 2024, after starting the week on a low note.
The week started with India's 10-year government bond yield falling below the critical 7.15 per cent mark to a near four-month low, after India's December core inflation declined, with some economists expecting the Reserve Bank of India (RBI) to ease its policy stance to 'neutral' in February 2024 amid declining inflationary trends.
India's benchmark 10-year yield is currently at 7.18 per cent, higher than its previous close at 7.17 per cent last week.
The weekly debt sale had offset the impact of rising US yields. US bond yields moved higher this week, amidst investor resistance to expectations of aggressive rate cuts.
The Indian government raised Rs 35,000 crore through bond sales, including Rs 5,000 crore from sovereign green bonds. Elsewhere, 13 state governments plan to auction securities worth Rs 24,280 crore via the RBI Core Banking Solution on January 23, 2024.
Bond market experts have been continuously highlighting that the rate hikes have peaked, signalling an imminent rate-cutting cycle amidst inflation cooling down with slower global growth.
For 2024, a downward trajectory for Indian bond yields is anticipated, offering a buying opportunity for bond investors.
A potential shift in US Federal Reserve's policy and Indian government taking further measures for fiscal consolidation are also expected to bring this ease in Indian bond yields.
The indicative yield for T-bills stand at 6.96 per cent, 7.17 per cent, and 7.15 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 7.07 per cent.
Moving on to longer tenures, both 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 7.18 per cent, respectively.
The Securities and Exchange Board of India (Sebi) said in a bulletin this week that India's bond yield at 7.2 per cent as of December-end reflected an investment friendly environment compared to most other BRICS nations.
Among BRICS nations, at the end of December 2023, the highest 10-year government bond yield was observed in Russia (12.3 per cent), followed by South Africa (11.4 per cent), Brazil (10.4 per cent), India (7.2 per cent) and China (2.6 per cent)
Several bonds have been issued by Indian banks for capital needs following RBI's increase in risk weightage on consumer credit, and the trend continued this week, as well.
State Bank of India on January 18, 2023 raised Rs 50 billion through Basel-III-compliant tier-I bond, but had to pay the highest coupon rate it had paid since November 2019 to attract investors, at a coupon of 8.34 per cent.
Bank of Baroda sought permission to place bids on January 24, 2023 to raise up to Rs 50 billion via 10-year infrastructure bonds. Private sector lender Kotak Mahindra Bank also informed that it is considering raising funds through non-convertible debentures (NCDs) in one or more tranches during FY 2024-25.
