Indian bond yields fall after debt switch announcement, budget eyed


MUMBAI, Jan 31 (Reuters) - Indian bond yields edged lower on Monday following the completion of a debt switch operation by the government and the central bank, which helped ease market borrowing concerns a day ahead of the federal budget.

The Reserve Bank of India said on Monday the government had done a conversion transaction with it for a total of 1.197 trillion rupees ($15.96 billion) on Friday.

Of the total bonds being switched, 636.5 billion rupees worth were due to mature in the next financial year starting April, the release showed.

"The debt switch reduces pressure on market borrowing as redemptions will now be much lesser, so in a way gives the government the option of borrowing less from the market," a senior fixed income trader at a private bank said.

The benchmark 10-year bond yield IN10YT=RR, IN061031G=CC was trading at 6.72%, down 3 basis points from its previous close.

India's economic survey on Monday predicted GDP growth to slow to 8-8.5% in 2022/23.

The finance minister will present the federal budget for the year in Parliament on Tuesday.

India plans to raise spending on infrastructure in the budget to put the economy on firmer footing, but fiscal constraints leave little chance of concessions for households hurting from the pandemic, officials said.

"We expect gross market borrowing of around 12 trillion rupees and a fiscal deficit of around 6.3-6.5% for next year," said Suyash Choudhary, head of fixed income at IDFC Asset Management Company.

"There is some noise around bond index inclusion and tax rationalisation, too," he added.

Traders will closely monitor details around the country's debt being included in global indexes which will help widen the investor base and ease pressure on domestic banks and investors.

The commentary around inflation and crude will also be crucial, they added, with India importing more than two-thirds of its oil needs.

Oil rose more than 1% on Monday to the near 7-year highs hit in the previous session, while supply concerns and political tension in Eastern Europe and the Middle East put prices on track for their biggest monthly gain in almost a year. O/R

($1 = 74.9870 Indian rupees)

(Reporting by Swati Bhat; Editing by kim Coghill)

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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