The Reserve Bank of India (RBI) has set the indicative T-bill yields at 6.70 per cent, 6.85 per cent, and 6.88 per cent for three-month, six-month, and 364-day tenors, respectively.
The Indian bond market has come under pressure this week after the US Federal Reserve increased the policy rates by 25 bps to maintain a 5.25-5.50 per cent range and as the US Treasury yields moved in toe. If the situation warrants, the Fed may go for one more rate hike in September.
For next week’s Treasury bill auctions, RBI has set the indicative yields at 6.70 per cent, 6.85 per cent, and 6.88 per cent for three-month, six-month, and 364-day tenors, respectively.
“With the continuous rise in US yields, India’s 10-year government bond yields, too, came under pressure and closed this Friday at 7.16 per cent compared to last week's closing of 7.08 per cent,” says Venkatakrishnan Srinivasan, the founder of Rockfort Fincap LLP, a financial advisory firm.
The Indian bond market will now wait for further cues from RBI’s monetary policy committee (MPC) meeting scheduled next week. “The bond market is already concerned about increasing Fed policy rates, local inflationary trends, system liquidity, rising bond yields, volatility in rupee and crude oil prices, the El Nino monsoon, etc. Due to these factors, the August month MPC may be keenly watched by our bond market participants,” Srinivasan adds.
This time, nine states will participate in the state development loan (SDL) auctions—Telangana, Tamil Nadu, Kerala, Rajasthan, Jammu & Kashmir, Assam, Maharashtra, Andhra Pradesh, and Punjab. Telangana (2040), Kerala (2040), and Andhra Pradesh (2043) are offering the highest interest rates at 7.5 per cent for their SDLs compared to other states.
The state governments plan to raise around Rs.19,500 crore as against the indicative borrowing calendar amount of Rs 19,930 crore in next week’s SDL auction.
Indian Bond Market
On Friday, the total outstanding amount of the 10-year government bond (2033) reached Rs 1.50 lakh crore after the auction was completed, according to Rockfort. “It is now widely expected that the RBI may start issuing new 10-year benchmark GoI bonds next month onwards,” says Srinivasan.
Due to these developments, the current 10-year benchmark government bond yield may continue to be weak and under stress until the MPC policy meeting.
Corporate Bond Market
This week saw a few notable bond issuances from organisations like NABARD, LIC Housing Finance, NIIF Infrastructure Finance, HDB Financial Services, Pimpri Chinchwad Municipal Corporation, Tata Capital Financial Services, and Aditya Birla Finance, among others.
Before the MPC policy conclave next week, “we can expect issuances from the State Bank of India (Infra bonds up to Rs 10,000 crore), and Grasim Industries (up to 1,000 crore), among others,” said Srinivasan.