The Indian bond market traded flat this week as US Treasury yields rose amid mixed economic signals after the Labor Department's latest data, prompting investors to stay low. Meanwhile, wrapping up the week, the Reserve Bank of India (RBI) on Friday announced the next auction of Treasury bills and state development loans (SDLs), with the yield for T-bills of three-month, six-month, and 364-day maturities at 6.71 per cent, 6.83 per cent, and 6.86 per cent, respectively.
This time, 11 states will participate in the auction—Manipur, Rajasthan, Goa, Punjab, Kerala, Bihar, Tamil Nadu, Maharashtra, Andhra Pradesh, West Bengal, and Uttar Pradesh.
Punjab is offering the highest interest rates at 7.41 per cent for SDLs maturing on July 5, 2034, followed by Rajasthan and West Bengal at 7.40 per cent each.
On Friday, the 10-year government bond yields fell by one basis point after closing at 7.08 per cent last week. The market traded flat most of the week, tracking inflation and the US treasury yield movements.
Rockfort Fincap LLP founder Venkatakrishnan Srinivasan says, "The Indian bond market will wait for further cues and may be subdued till next the monetary policy committee (MPC) meeting and the US Fed policy comments. We expect the 10-year bond yield to trade between 7.05 per cent and 7.15 per cent in the coming week too."
The state governments plan to auction SDLs worth Rs 19,000 crore next week, as against the indicative borrowing calendar amount of Rs 24,250 crore.
Meanwhile, in the corporate bond market, MTNL has tapped the bond market with the government of India guarantee this week. The total issue size is Rs 2500 crore, including the green shoe option. Srinivasan further adds, "The issue saw a good response from long-term investors and proprietary traders. The issue has garnered Rs 9,178 crore worth of bids, of which the issuer has accepted Rs 2,480 crore at 7.59 per cent, payable semi-annually."
"We haven't seen many large issuances above Rs 1,000 crore except PFC (Power Finance Corporation, SBI (State Bank of India), and MTNL (Mahanagar Telephone Nigam Ltd.) in July; hence, we expect a drastic reduction in corporate bond issuances than the previous month."
Besides the AT1 bond issue, SBI plans to issue infra bonds worth Rs 10,000 crore this month. "It is expected to garner good investor response at an attractive yield," adds Srinivasan.
