Bond yield at its highest in 2012

Written by Bloomberg | Mumbai | Updated: Mar 28 2012, 05:42am hrs
The government bonds declined on Tuesday, pushing the 10-year yield to its highest level of 2012, on speculation that the government will announce plans to borrow the majority of its annual debt target in the six months beginning April 1.

The government will borrow a record R5.69 lakh crore in the 12 months through March 2013, compared with R5.1 lakh crore this year, finance minister Pranab Mukherjee said March 16.

Higher oil costs may deter policymakers from lowering interest rates next month, said M Natarajan, the Mumbai-based head of treasury at Bank of Nova Scotia.

Investors are jittery as the borrowing programme could be frontloaded, he said. Oil prices also continue to be a worry.

The yield on the 8.79% bonds due November 2021 rose two basis points to 8.50%, according to the central banks trading system. Thats the highest rate for the debt since December 30.

The government may borrow as much as 65% of its target in the first half, said Natarajan.