Indian bonds rally as nation plans $10 billion global debt sale

By Subhadip Sircar

Sovereign bonds in India extended the best weekly advance since May after a government official said that the nation could raise as much as $10 billion offshore, a move which may help shift a chunk of the borrowing away from the domestic market.

“In terms of risk management I don’t see it exceeding 10-15 per cent of the total borrowing, which makes it roughly about $10 billion,” Economic Affairs Secretary Subhash Garg said in an interview on Saturday. There’s huge appetite overseas for Indian debt, he said.

Bonds rallied on Friday after the government surprised traders by trimming its fiscal deficit target to 3.3 per cent of gross domestic product from 3.4 per cent projected in February, and by announcing plans to tap the offshore debt markets for the first time. Investors have been concerned about Prime Minister Narendra Modi’s plans to borrow a record 7.1 trillion rupees locally this fiscal year.

“There was some confusion on the quantum of the USD borrowing,” said Naveen Singh, head of fixed-income trading at ICICI Securities Primary Dealership in Mumbai. “The figure being close to $10 billion may potentially reduce fiscal second-half borrowing.”

The yield on the benchmark 10-year bond declined nine basis points to 6.61 per cent on Monday, extending Friday’s five-basis point drop. Yields have slid more than 70 basis points since the end of April. The rupee slid 0.4 per cent against the dollar.