Bonds Endure Heavy Sell-Off In February

Indian bonds endured another bad week, the space sold off after a weak auction where underwriters had to step in again. The sell-off pushed 10-year yields up 33bps in February, its biggest jump since April 2018.

• Underwriters bought about 20% of the INR 240b of bonds on offer: INR 26.5b of the 2023 line and INR 21.3b of 2035 notes. The RBI only sold INR25b of 2050 debt, half of what it had planned.
• Data late on Friday showed the Indian economy returned to growth in Q4, GDP rose 0.4% against expectations of a 0.6% rise. The finance ministry said the return to growth was "a reflection of a further strengthening of V-shaped recovery that began in 2Q of 2020-21, after a large GDP contraction in 1Q followed one of the most stringent lockdown imposed by government relative to other countries", adding that the V- shaped recovery was driven by rebound in both private final consumption expenditure and gross fixed capital formation
• The RBI also announced on Friday that its current inflation targeting regime is effective at containing price-growth and that it recommends the government renew it for another five years. The RBI targets inflation in a band of 2%-6%.