Bond prices suffer biggest monthly loss in a decade

Written by Bloomberg | Updated: Feb 1 2009, 03:49am hrs
India's 10-year bonds completed the biggest monthly loss in at least a decade as concerns mounted that the government will borrow more than planned to finance additional spending.

Benchmark yields climbed to the highest in three weeks after the government sold debt at higher than expected yields at an auction on Friday. Bonds ended a five-month rally after the central bank this week refrained from cutting interest rates and said the budget deficit will be "substantially higher" than estimates.The yield on the 8.24% note due April 2018 surged 92 bps this month to 6.17% at the close. India sold Rs 4,000 crore of a new 10 year bond at a maximum yield of 6.05%, the central bank said. It also sold Rs 3,000 crore of the 7.56% note due in 2014 and the 6.83% security due in 2039 at 6.0163% and 7.3487% yield respectively.

"Sentiment is gradually turning a bit bearish as concerns are increasing that the government's accounts may not look good at the end of the fiscal year," said Roy Paul, assistant manager, treasury, Federal Bank Ltd . Rupee completed a monthly loss as overseas funds dumped stocks on concern the global economic slump will hurt growth and erode earnings. The rupee declined to 48.875 per dollar at the close, from 48.775 on December 31.