Primary dealers rescue RBI's bond auction for the sixth time this year

Primary dealers bought Rs 19,400 cr of debt, equal to about 60% of the Rs 31,000 cr the govt offered at the weekly auction, RBI said in a statement Friday

Bond underwriters stepped in to save a debt auction for the sixth time this year, the most since the 2013 taper tantrum, amid rising global yields. Primary dealers bought Rs 19,400 crore ($2.66 billion) of bonds, equal to about 60 per cent of the Rs 31,000 crore the government offered at the weekly auction, the Reserve Bank of India said in a statement Friday. Dealers bought Rs 10,900 crore of the benchmark 10-year bond out of the Rs 12,000-crore sale target. Bonds extended a drop after the results.
 
The central bank, which is also the government’s debt manager, has constantly struggled to sell sovereign bonds this year as a selloff in global debt markets and a record supply prompted traders to demand higher yields. To calm the markets, the RBI has raised the amount of bonds it plans to buy at the next week’s Operation Twist.
 
“Caught between domestic cues and a global squeeze in rates, a repricing of the yield curve (higher) lies ahead,” Radhika Rao, chief India economist at DBS Bank in Singapore, wrote in a note. That’s “in sync with the evolving dynamics of an improved growth outlook, lower liquidity surplus and above-target inflation.”

 
Rising global yields have hurt new bond sales from Indonesia to Japan and Germany this week. Federal Reserve Chair Jerome Powell refrained from pushing back against the recent rise in US yields, further hurting the demand for sovereign debt.
 
Benchmark bonds have sold off in recent weeks, coinciding with the selloff in US Treasuries, seen as the benchmark for the global borrowing costs. The yield on the Indian benchmark 10-year bonds has climbed 32 basis points in February, the biggest advance in almost three years.