Bloomberg News

India Primary Dealers Buy Bonds at Auction Third Time This Month

October 28, 2011

Oct. 28 (Bloomberg) -- Primary dealers in India bought unsold government debt at auctions for the third consecutive time this month in a sign the notes aren’t attracting enough demand at yields the nation’s central bank finds acceptable.

The finance ministry raised 150 billion rupees ($3 billion) selling securities due in 2017, 2022, 2027 and 2040, of which underwriters bought 1.49 billion rupees, according to a central bank statement today. Last month, the government increased its borrowing target for the six months through March by 32 percent. The government may exceed its fiscal deficit aim of 4.6 percent of gross domestic product, said K. Ramanathan, chief investment officer at ING Investment Management Pvt. in Mumbai.

“The increase in supplies has been the bane of the bond market ever since the second-half auction calendar was announced,” said Mumbai-based Ramanathan. “There’s little appetite among investors to add to their holdings, which is driving up yields.”

The yield on the 7.80 percent note due April 2021 jumped 9 basis points today to 8.85 percent. The rate was the highest level for a benchmark 10-year bond since August 2008, according to data compiled by Bloomberg.

Primary dealers bought 31.1 percent, or 40.4 billion rupees, of the 130 billion rupees of notes offered at a previous auction on Oct. 14. They bought 6 percent of the 150 billion rupees of debt offered on Oct. 7.

At today’s auction, the government sold 40 billion rupees of 7.99 percent bonds due 2017 at a yield of 8.9195 percent, the Reserve Bank of India said in an e-mailed statement. It auctioned 60 billion rupees of 8.13 percent note due 2022 at 8.9505 percent. It also sold 20 billion rupees of 8.28 percent bonds due 2027 at 8.9799 percent and 30 billion rupees of the 8.30 percent note due 2040 at 8.9787 percent.

--Editors: Sam Nagarajan, Indranil Ghosh

To contact the reporter on this story: V Ramakrishnan in Mumbai at rvenkatarama@bloomberg.net

To contact the editor responsible for this story: Sandy Hendry at shendry@bloomberg.net


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