India 2036 bond yield hits 7.3113% ahead of record 340 billion rupee sale
Indian government bonds came under selling pressure on Friday as New Delhi prepared to sell 340 billion rupees ($3.62 billion) of the benchmark 6.94% 2036 paper, with the yield climbing to 7.3113% by 10:00 a.m. IST from 7.2467% on Thursday — a rise of more than 16 basis points over three sessions.
The auction will lift outstanding issuance of the 2036 bond to 2.72 trillion rupees, the highest for any security ever. A trader with a primary dealership said investors were turning cautious ahead of the sale, especially with sticky inflation in both India and the United States raising doubts over larger-size interest rate hikes.
India's annual retail inflation accelerated to 6.09% in October from 5.54% in September, surpassing the 5.93% forecast in a Reuters poll and the Reserve Bank of India's medium-term target of 4%. The data reinforced expectations that the Reserve Bank of India will follow up its October rate increase — its first in nearly four years — with another hike in early December.
US markets added to the pressure. The 10-year Treasury yield rose decisively above 5% on Thursday after stronger-than-expected October consumer price data, and traders priced a 15% chance of a 50-basis-point Federal Reserve move on December 9, up from zero a week earlier. President Donald Trump's remark that Washington did not need to strike a deal with Iran also weighed on sentiment, with concerns that geopolitical tensions could keep oil prices elevated and complicate the inflation outlook.
The next test comes with Friday's auction result, which will show how much yield investors demand to absorb the record supply.
