Bonds fall on debt auctions

The benchmark 10-year bonds fell before this week’s government debt auction and on speculation some investors shunned debt in favour of equities as the local stock index gained.

Yields on benchmark notes due 2019 rose to the highest level since they were issued on July 13 as the government sells a record amount of debt this financial year to finance its budget deficit. India plans to sell Rs 12,000 crore of securities on August 7 as part of its borrowing program.

“Supply concerns and the recent rise in equities is serving as a double blow to debt securities,” said Kamlesh Chand, a trader at IndusInd Bank in Mumbai. “Investors are finding it difficult to hold securities beyond a point which is causing a sudden jump in yields.” The yield on the 6.9 per cent note due July 2019 climbed eight basis points to 7.09 per cent at close in Mumbai, according to the central bank’s trading system.

Re rises to 2-month high

The rupee rose to a two-month high as overseas funds bought the nation’s shares for a 16th straight day, the longest stretch in two years. The rupee has climbed 2.5 per cent this year, the third-best performance among Asian currencies, as funds based abroad bought $7.5 billion more stocks than they sold, compared with record sales in 2008. The central bank on July 28 raised its economic growth forecast for the year ending March 31 to 6 per cent “with an upward bias.”

Call rates unchanged
The overnight money rates were barely changed on Wednesday as ample cash surpluses in the money market offset demand from banks to meet reserve requirements.

Call money rates stayed near the bottom end of the central bank’s main interest rate corridor of 3.25 per cent even as banks geared up to report fortnightly cash reserve needs.