India bank strike
India’s plan to raise 120 billion rupees ($2.5 billion) at a debt auction failed today amid a workers strike at the nation’s banks, the biggest buyers of sovereign securities. Bonds rallied, reversing a decline.
The federal government, seeking to finance a 16-year high budget deficit, failed to raise funds for the first time since March as a two-day employee protest at lenders reduced trading volumes in the bond and currency markets. The central bank, which manages government debt sales, didn’t provide details or a reason for its decision to reject all the bids.
The yield on the benchmark 6.9 percent note due July 2019 dropped five basis points, or 0.05 percentage point, to 7.03 percent, after reaching the day’s high of 7.13 percent before the outcome of the sale, according to the central bank’s trading system. The price of the security jumped 0.35, or 35 paise per 100-rupee face amount, to 99.05.
“The central bank probably chose to refrain from giving any signal by simply rejecting all bids,” said Pradeep Madhav, chief operation officer at Securities Trading Corp. of India Ltd., a Mumbai-based primary dealer. “The reasons could have been many, including that they didn’t get full subscription or investors bid yields that were very high. Yet, the reasons revolve around the strike.”
The government offered to sell 40 billion rupees of the 6.49 percent bonds due 2015, 60 billion rupees of the 6.9 percent notes maturing in 2019 and 20 billion rupees of the 7.4 percent securities due 2035.
Lower Volume
Traders in a Bloomberg News survey before the auction forecast the government would sell the 2015 bonds at 7.04 percent, the 2019 bonds at 7.15 percent, and the 2035 securities at 8.1 percent.
The finance ministry today said in New Delhi it will sell 120 billion rupees of debt on Aug. 14.
More than 900,000 employees of state-run, private sector and foreign banks struck work demanding higher wages and benefits. Traded volumes averaged 41.7 billion rupees in the past two days, lower than the 75.5 billion rupees in the first three days of this week, according to Clearing Corp. of India Ltd., the company that guarantees bond settlements.
“Bids would have only been accepted at higher yields and wouldn’t have reflected the correct picture as the biggest players were absent,” said Kumar Nathani, who manages about $35 million of debt at Taurus Asset Management Co. in Mumbai. “The rejection has prevented the adverse impact it would have had. The strike made its impact felt considerably.”
Rising Yields
India’s benchmark 10-year yield has risen 1.77 percentage points this year after Finance Minister Pranab Mukherjee in his July 6 budget unveiled plans to borrow a record 4.51 trillion rupees in the year ending March 31, with estimates for the budget shortfall at 6.8 percent of gross domestic product.
India has scheduled 2.99 trillion rupees of debt sales in the first half, more than in the second because it wants to ensure the market borrowing doesn’t hurt companies when demand for loans rises in the October-March period, Junior Finance Minister Namo Narain Meena told lawmakers today.
Indian bonds have handed investors a loss of 4.2 percent this year, the worst performance among the 10 regional local- currency debt markets in Asia, according to an index compiled by HSBC Holdings Plc.
India’s plan to raise 120 billion rupees ($2.5 billion) at a debt auction failed today amid a workers strike at the nation’s banks, the biggest buyers of sovereign securities. Bonds rallied, reversing a decline.
The federal government, seeking to finance a 16-year high budget deficit, failed to raise funds for the first time since March as a two-day employee protest at lenders reduced trading volumes in the bond and currency markets. The central bank, which manages government debt sales, didn’t provide details or a reason for its decision to reject all the bids.
The yield on the benchmark 6.9 percent note due July 2019 dropped five basis points, or 0.05 percentage point, to 7.03 percent, after reaching the day’s high of 7.13 percent before the outcome of the sale, according to the central bank’s trading system. The price of the security jumped 0.35, or 35 paise per 100-rupee face amount, to 99.05.
“The central bank probably chose to refrain from giving any signal by simply rejecting all bids,” said Pradeep Madhav, chief operation officer at Securities Trading Corp. of India Ltd., a Mumbai-based primary dealer. “The reasons could have been many, including that they didn’t get full subscription or investors bid yields that were very high. Yet, the reasons revolve around the strike.”
The government offered to sell 40 billion rupees of the 6.49 percent bonds due 2015, 60 billion rupees of the 6.9 percent notes maturing in 2019 and 20 billion rupees of the 7.4 percent securities due 2035.
Lower Volume
Traders in a Bloomberg News survey before the auction forecast the government would sell the 2015 bonds at 7.04 percent, the 2019 bonds at 7.15 percent, and the 2035 securities at 8.1 percent.
The finance ministry today said in New Delhi it will sell 120 billion rupees of debt on Aug. 14.
More than 900,000 employees of state-run, private sector and foreign banks struck work demanding higher wages and benefits. Traded volumes averaged 41.7 billion rupees in the past two days, lower than the 75.5 billion rupees in the first three days of this week, according to Clearing Corp. of India Ltd., the company that guarantees bond settlements.
“Bids would have only been accepted at higher yields and wouldn’t have reflected the correct picture as the biggest players were absent,” said Kumar Nathani, who manages about $35 million of debt at Taurus Asset Management Co. in Mumbai. “The rejection has prevented the adverse impact it would have had. The strike made its impact felt considerably.”
Rising Yields
India’s benchmark 10-year yield has risen 1.77 percentage points this year after Finance Minister Pranab Mukherjee in his July 6 budget unveiled plans to borrow a record 4.51 trillion rupees in the year ending March 31, with estimates for the budget shortfall at 6.8 percent of gross domestic product.
India has scheduled 2.99 trillion rupees of debt sales in the first half, more than in the second because it wants to ensure the market borrowing doesn’t hurt companies when demand for loans rises in the October-March period, Junior Finance Minister Namo Narain Meena told lawmakers today.
Indian bonds have handed investors a loss of 4.2 percent this year, the worst performance among the 10 regional local- currency debt markets in Asia, according to an index compiled by HSBC Holdings Plc.
No comments:
Post a Comment