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India Bond Yields Stay Down On Borrowing Relief, Special OMO Eyed

Thursday,   01-Oct-2020   01:27 PM (IST)

India's sovereign bond yields stayed lower in the afternoon session, after the federal government kept its full-year borrowing target unchanged, while traders awaited the result of today's special open market operation. The benchmark 5.77% bond maturing in 2030 changed hands at 98.32 rupees, yielding 6.00%, at 1:00 p.m. in Mumbai, against 98.19 rupees and 6.02% yesterday. The yield earlier today fell to 5.96%, the lowest since Sep. 7. The Indian rupee was at 73.45 to the dollar against 73.77 yesterday. The central bank is conducting a special open market operation worth 100 billion rupees today. New Delhi plans to raise 4.34 trillion rupees by selling bonds in the second half of the fiscal year ending Mar. 31, in line with its record annual borrowing of 12 trillion rupees. The target had been raised in May as the Covid-19 pandemic pummeled the economy into a contraction and choked government revenue. The government might find it tough to not exceed its borrowing target given the country's weak finances and as the coronavirus-hit economy needs support, the State Bank of India’s economic research wing said today. The sovereign will continue to stick to its borrowing target despite the expected miss of the divestment target, Tarun Bajaj, economic affairs secretary had said yesterday. The target priced in a need for stimulus, he added. Nomura expects the Reserve Bank of India to buy around 1.90 trillion rupees of notes during October-March, amounting to 44% of the planned second-half borrowing. Asia's third-largest economy contracted by a record 23.9% in April-June, a period that saw one of the most stringent of lockdowns to curb the spread of the pandemic. The country is the worst virus-hit nation after the U.S. with total cases at 6.31 million including 98,678 fatalities. Several analysts expect a double-digit contraction in India's economy this fiscal year. India yesterday further eased lockdown restrictions outside the so-called containment zones. Cinemas, theatres, multiplexes will be permitted to open with up to 50% of their seating capacity. The benchmark Brent crude oil contract was trading at $42.31 per barrel. India imports nearly 85% of its crude oil requirements.