India's long-term government bond yields saw a slight uptick by the week's end following last week's significant decline, marking the biggest weekly drop in seven months. Closing at 7.19 per cent yield on December 22, 2023 slightly up from the day's start at 7.18 per cent, trading remained stagnant with low volumes as traders are anticipating fresh debt supply from the weekly auction, new issues. The 10-year bond benchmark yield was 7.16 per cent the previous week.
The Indian government raised Rs 30,000 crore through bond sales, including Rs 10,000 crore from 14-year bonds. Meanwhile, 12 state governments plan to auction securities worth Rs 24,849 crore via the RBI Core Banking Solution on December 26, 2023.
The market is looking for cues from central bank members on 2024's rate trajectory, with broader expectations that there may be no rate action until the middle of next year. Amidst concerns about rising banking system liquidity deficit market watchers await the RBI's seven-day variable rate repo data. Meanwhile, the U.S. yields stayed lower during the week.
The indicative yield for T-bills stands at 6.94 per cent, 7.13 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 7.07 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 7.08 and 7.19 per cent, respectively. All T-bills showed a dip in yields, whereas indicative yields for all long term instruments inched up higher compared to the previous week.
After the Reserve Bank of India increased the risk weightage on consumer credit, Indian banks have continued tapping debt markets during the week, for capital needs, through several bond issuances. HDFC Bank raised Rs 7,425 crore through its maiden 10-year infrastructure bond issue, at the coupon rate of 7.71 per cent.
The week saw robust fundraising activity in the bond market, where the Bank of Baroda, the National Bank for Agriculture and Rural Development (NABARD), and the Indian Renewable Energy Development Agency (IREDA) collectively raised Rs 13,500 crore through bond issuances. While offerings of NABARD and Bank of Baroda were fully subscribed, IREDA secured Rs 1,000 crore out of its total issue size of Rs 2,500 crore.
State-owned Punjab National Bank aims to raise Rs 3,000 crore through Basel-III Additional Tier-I bonds on December 27.
SEBI's bulletin release yesterday noted decreasing turnover of corporate bonds throughout 2023, peaking in February but gradually declining thereafter.