Weak Auctions Expected To Weigh On Bonds

India's bond auction on Friday disappointed again, underwriters once again had to step in to save the sale. Primary dealers took down around 60% of the sale, which included most of the 10-year issue, as the RBI were unwilling to lock in higher funding costs.

• As mentioned last week, in a bid to soothe market fears the RBI has expanded its bond purchases for next week to INR 200bn at its Operation Twist, while it will keep the amount of shorter bonds sold at INR 150bn. The central bank has included the benchmark 10-year bond as well as the current 5.15% 2025 bond in its purchase plan. RBI Governor Das said that the decision to expand short end purchases at Operation Twist is a signal on liquidity.
• Elsewhere, a senior government official said on Friday that the government is expected to retain the medium term inflation target at 4%, with a band at 2% -6%, for the next five years.