India’s benchmark bonds fell for a sixth day on concern investors will refrain from adding to their holdings as the government may increase borrowing in the next fiscal year beginning April 1.
Yields reached a six-week high before Finance Minister Pranab Mukherjee unveils the budget on March 16. The central bank will keep the repurchase rate unchanged at 8.5 percent at a policy review on March 15, according to 12 of 14 economists surveyed by Bloomberg. Two expect a 25-basis point cut. The government may raise its debt sale target by 6 percent to a record 5.4 trillion rupees ($108 billion), said N.S. Venkatesh, head of treasury at state-run IDBI Bank Ltd.
“Prospects of a huge borrowing are probably deterring investors,” Mumbai-based Venkatesh said. “The central bank would also like to see some more fiscal consolidation before kicking off rate cuts.”
The yield on the 8.79 percent bonds due November 2021 rose one basis point, or 0.01 percentage point, to 8.31 percent as of 10:12 a.m. in Mumbai, according to the central bank’s trading system. The rate is the highest since Jan. 27.
One-year interest-rate swaps, or derivative contracts used to guard against fluctuations in funding costs, were little changed at 8.11 percent, according to data compiled by Bloomberg.
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