Indian bonds rebound as government surprises with 10-year debt auction

The Indian bonds rebounded from previous slide Tuesday after the government of India’s unexpected announcement to auction the benchmark 10-year gilts, which is scheduled to be held on Friday.

The yield on the benchmark 10-year bonds, which moves inversely to its price, fell more than 1 basis point to 7.110 percent, the yield on super-long 30-year bond dipped nearly 2 basis points to 7.259 percent and the 5-year note yield also slid 2 basis points to 7.019 percent by 07:00 GMT.

According to Reuters, the Reserve Bank of India will auction four bonds for 140 billion rupees this week including 80 billion rupees of the benchmark 10-year paper, which will take its issuance to 870 billion rupees.

Moreover, investors will remain keen to focus on the joining of hawkish Urjit Patel as the new governor of the Reserve Bank of India, with effect from September 4. Urijit Patel, current deputy governor, was expected as the only hawkish candidate for Governor chair. As Chairman of the Urjit Patel committee, he advised moving to a consumer inflation target of 4 – 2 percent and towards positive real interest rates.

Meanwhile, the Sensex rose 0.95 percent or 263.08 points to 28,165.74 and Nifty-50 futures traded 1.02 percent higher or 88.50 points at 8,747.50 by 07:20 GMT.