India’s 10-year government bond yields held at a six-week low before the central bank buys debt for the second time this month to ease a cash squeeze.
The Reserve Bank of India will buy as much as 120 billion rupees ($2.2 billion) of notes due in 2017, 2020, 2022 and 2026 tomorrow, according to a statement on its website. Lenders borrowed 1.01 trillion rupees from the monetary authority’s repurchase window on Dec. 7, according to data compiled by Bloomberg. The central bank lent an average of 928 billion rupees a day in November, compared with 671 billion rupees the previous month.
“The open-market buying is continuing to support bonds,” said Srinivasa Raghavan, executive vice president of treasury at Dhanlaxmi Bank Ltd. (DHLBK)
The yield on the 8.15 percent notes maturing in June 2022 was little changed at 8.17 percent in Mumbai, according to the central bank’s trading system. Today’s rate matched the yield touched on Dec. 6, which was the lowest since Oct. 29. There was no trading in the benchmark 10-year note on Dec. 7 before a coupon payment tomorrow.
The monetary authority, which last cut the repurchase rate by 50 basis points to 8 percent in April, will review its policy on Dec. 18.
“Investors will wait for further cues from next week’s policy review,” Raghavan said.
In the first purchase since June, the RBI bought 116.43 billion rupees of securities on Dec. 4, taking the total buying so far in the fiscal year that began April to 936.43 billion rupees.
The one-year interest-rate swap, a derivative contract used to guard against fluctuations in funding costs, rose two basis points to 7.67 percent, data compiled by Bloomberg show.
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