Has an invisible hand stepped in to support Indian sovereign bond market?

Has an invisible hand stepped in to support the Indian sovereign bond market? Traders are abuzz with speculation over the identity of the buyer or buyers behind the $862 million of purchases on Friday.

Investors in a category labeled ‘others’ bought a net Rs 57-billion of debt, the most for that group since at least 2006, according to data compiled by Bloomberg. These buyers could comprise the Reserve Bank of India (RBI), insurance companies and pension funds. 

The purchase couldn’t have come at a better time, with high oil prices and unexpectedly hawkish RBI minutes combining to spur a 29-basis point jump in the benchmark yield last week. Speculation swirling around trading floors in Mumbai has it that the central bank may be behind the buying, with the official data from the RBI only available coming Friday. 

“The large buying by ‘others’ has led to some speculation about the RBI,” said Ajay Manglunia, head of fixed income at Edelweiss Financial Services. “The market is overbeaten and a lot of pessimism has already been built in.” 

While the central bank has sporadically bought bonds in the secondary market for managing its own balance sheet, the last time it was a consistent buyer was over two months through January 2016. The central bank didn’t immediately reply to an email request for comment.