Indian Bonds Set To Extend Losses On Worries Of Larger Supply
The yield on the benchmark 10-year bond climbed to 6.44% on Tuesday.
Indian bonds dropped to a four-month low, as analysts warned of further losses amid concerns that the government may increase borrowing to fund a potential fiscal stimulus in response to steep US tariffs.
The yield on the benchmark 10-year bond climbed to 6.44% on Tuesday, the highest since April. Standard Chartered Plc. forecasts it could rise further to 6.6% by the first quarter of next year. Ten-year yields moved up by about 30 basis points from a four-year low seen in early June.
The slide in bond prices comes despite expectations that retail inflation may ease to multi-year lows in a report due later on Tuesday. Traders, however, see the decline as temporary after the Reserve Bank of India last week projected a sharply higher inflation print for the first quarter of next fiscal year, dampening hopes of further cuts in interest rates.
President Donald Trump’s 50% tariffs on Indian shipments to the US. New Delhi last week announced 300 billion rupees.
(image source: Bloomberg)
Concerns over higher government borrowing are mounting as exporters urge the centre to introduce relief measures in response to President Donald Trump’s 50% tariffs on Indian shipments to the US. New Delhi last week announced 300 billion rupees $3.4 billion of subsidy for state-owned oil firms for sale of cooking gas at below market rates.
The government plans to borrow 14.82 trillion rupees in the current fiscal year to March 2026, marginally higher than the previous year.
The support to the oil refiners amid slowing tax growth is adding up to the “psychological pressure” on the market, said Ashhish Vaidya, head of treasury at DBS Bank Ltd. in Mumbai.
“Market sentiment has sort of broken, and this is likely to continue for some time, at least unless we see some global triggers in terms of growth decelerating,” said Vaidya.