Auction Cancellation Expected To Support Bonds

Indian bonds are likely to come under pressure today as yields rise globally, but the space should fare better than regional counterparts. Reasons for this include pledged support from the RBI, auction cancellation and additional liquidity operations.

• The RBI cancelled scheduled auctions this week, reducing planning annual supply by INR 200bn. While RBI Governor Das said reiterated that the bank will conduct more than INR 3t OMOs in the next fiscal year, a similar amount to this year.
• The RBI also announced special liquidity operations heading into the end of the fiscal year (March 31). The bank plans INR 250bn of 11-day reverse repos today, and a further INR 250bn of 5-day on Wednesday. The operations have been classed as fine tuning by the bank and are designed to ensure liquidity into year end, on this basis standalone primary dealers are entitled to participate. The RBI has said it will not conduct reverse repos outside these ops for 14 days from March 26.
• Bonds are on track for their best week since the budget was unveiled on February 1, 10-year yield finished 6bps lower yesterday, finishing at 6.13% from a peak of 6.247% on March 10.
• There could be some caution over the coronavirus situation, India's infections have increased dramatically in the last month. On Thursday the federal Health Ministry reported a daily jump of over 53,000 new infections. Government officials said yesterday India has slowed exports of coronavirus vaccines as it expands domestic inoculations to curb a steady increase in infections. India expanded its vaccination programme last week to include everyone over 45.