India’s 10-year benchmark government bond yield rose to the highest at 7.40%. This is the highest it has climbed to since November 9, 2022. The bond yields rose to a fresh high ahead of fresh supply of debt scheduled for Friday and next week’s budget announcement.
When the bond yields in India go up, global investors find India debt more attractive in relation to global debt. This can lead to capital outflows from equities and inflows into debt.
Reuters quoted a trader with a primary dealership saying, “There was an attempt to break the crucial technical level of 7.38% in the morning, but now bonds will be steady around the current levels till the bidding for auction is done.”
Today (Friday), the Indian government was set to raise 300 billion rupees via debt sale, which includes the liquid 14-year bond. Indian markets were closed on Thursday.
A government bond is a type of debt-based investment, where you loan money to a government in return for an agreed rate of interest. Governments use them to raise money for its infrastructure spending and investors use them to get regular returns.
Friday’s auction comes just ahead of the presentation of the Union Budget on February 1st, 2023. A Reuters poll of economists predicted that the government will borrow a record 16 trillion rupees in the fiscal year ending March 2024. Traders expect yields on long-term bonds to rise faster.
As of now a major focus remains that Budget 2023 in which the government will outline its financial planning for 2024.
