Bonds record biggest weekly gain since Jan

The 8.83% 2023 bond ended at 8.94%, compared with its previous close of nine per cent

Government bonds capped their biggest weekly gain in almost three months as yields near the highest level since November attracted buyers. The yield on the 10-year benchmark government bond 8.83 per cent 2023 once again fell below the nine-per cent level.

The 8.83 per cent 2023 bond ended at 8.94 per cent, compared with its previous close of nine per cent. The government bond auction for Rs 16,000 crore also sailed smoothly on Friday.

The yield had surged 30 basis points in the four trading sessions through April 7, on concern that demand for existing notes would suffer due to increased issuance by the government. The first auction of the financial year held last Friday had seen a partial devolvement on primary dealers for Rs 864 crore. The yield on the 8.83 per cent 2023 bond slid 13 basis points, or 0.13 percentage point, this week to 8.94 per cent.  

That's the biggest decline since the five days through January 17. The rate had climbed to 9.10 per cent on April 7, the highest level for benchmark 10-year notes since November 22, 2013.

"Anything above nine per cent seems attractive as that level is and has historically been a psychological barrier for the market," said Killol Pandya, Mumbai-based senior fixed-income fund manager at LIC Nomura Mutual Fund Asset Management Co. "So it's quite natural that you saw bonds gaining this week."

According to the issuance calendar of marketable dated securities, the government can borrow Rs 3.68 lakh crore in the April-September period.