Why did Indian government bonds rally?

Indian government bonds rallied due to stronger-than-expected demand in state debt sales and benign U.S. Treasury yields.

How much debt did Indian states raise?

Indian states raised 394.50 billion rupees through the sale of debt.

What influenced the U.S. Treasury yields?

U.S. Treasury yields fell as retail inflation slowed in January, increasing bets for rate cuts.

Home / Business and Economy / Indian Bonds Surge on Strong Debt Demand

Indian Bonds Surge on Strong Debt Demand

17 Feb

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Summary

Indian government bonds saw yields decline by 11 basis points.
States raised 394.50 billion rupees in debt sales.
US Treasury yields fell as inflation slowed in January.

Indian Bonds Surge on Strong Debt Demand

Indian government bonds experienced a notable upswing on Tuesday, extending their winning streak. This positive performance was primarily driven by robust demand during state debt auctions, which saw states raise 394.50 billion rupees, exceeding planned issuance targets. The yields for these state bonds settled below market expectations for a second consecutive week.

The Reserve Bank of India's commitment to maintaining adequate liquidity has been a key factor, ensuring overnight rates remain low and fostering demand for government debt. The banking system has consistently reported a liquidity surplus, averaging approximately 2.70 trillion rupees in February.

Adding to the favorable conditions, U.S. Treasury yields continued their downward trend. The 10-year yield decreased to 4.03%, influenced by slower-than-anticipated U.S. retail inflation in January, which fueled expectations of potential interest rate cuts later this year. This global trend provided additional support to the Indian bond market.

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