Govt bonds surge as RBI signals more debt purchases

By: | Updated: December 6, 2018 5:58 PM

Volumes in India’s government bonds surged to the highest in more than a year, reflecting a revival of bullish spirits in a market emerging from a yearlong selloff, after the central bank signaled it may keep buying debt for four more months.

RBI, Government bonds, debt purchases, inflation projection, RBI policy reviewThe benchmark yield slid to a new eight-month low of 7.41 percent at 11:30 a.m. in Mumbai. (PTI)

Volumes in India’s government bonds surged to the highest in more than a year, reflecting a revival of bullish spirits in a market emerging from a yearlong selloff, after the central bank signaled it may keep buying debt for four more months. Turnover surged to 883 billion rupees ($12.4 billion) on Wednesday, the highest since June 2017, as the Reserve Bank of India added to the cheer by cutting its inflation projection at its policy review. The benchmark yield slid to a new eight-month low of 7.41 percent at 11:30 a.m. in Mumbai.

“The yield may fall as low as 7 percent if oil prices remain low,” said Mahendra Jajoo, the head of fixed income at Mirae Asset Global Investments in Mumbai. “The outlook is very bullish.”

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The plunge in oil prices, the bugbear for the nation’s trade deficit, from a four-year high reached in October along with the RBI’s debt-buying support, have turned the tide in the nation’s bond market that had bled for five quarters amid concerns of the government missing its budget targets. Benchmark 10-year bonds are now set for their first quarterly advance since June 2017.

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