AUBANK.NSE

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MUMBAI: Indian government bonds saw a sharp selloff this week, with the 10-year benchmark yield posting its biggest jump in over three years, as a proposed tax tweak stoked concerns of a higher fiscal burden and heavier debt supply. The 10-year yield ended at 6.5510%, against 6.5278% on Thursday, its highest closing level since March 28. The yield jumped 15 basis points this week and clocked its steepest weekly gain since the week ended May 4, 2022. Yields move inversely to prices. Sentiment soured after Prime Minister Modi introduced sweeping cuts to the goods and services tax, including moving to a two-rate structure of 5% and 18%, scrapping the 12% and 28% rates. A state ministers’ panel has backed the new structure, fuelling more concerns and leading to fears of fiscal slippage that could nudge the government to undertake additional borrowing. Traders fear there is little relief in sight as heavy supply continues. New Delhi sold 300 billion rupees of the benchmark bond on Friday, near estimated levels.

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MUMBAI: Indian government bonds tumbled on Monday, wiping out gains from S&P’s rating upgrade last week, as proposed tax cuts reignited fiscal concerns and stoked fears of heavier debt supply. The benchmark 10-year bond yield ended at 6.4968%, up nearly 10 basis points from Thursday’s close of 6.4003%. Bond yields move inversely to prices. Prime Minister Narendra Modi on Friday announced sweeping changes to the goods and services tax (GST) regime which will make daily essentials and electronics cheaper from October. The tax cut plan, however, entails a fiscal cost given GST is a major revenue generator. IDFC First Bank says the cuts will cost states and the federal government $20 billion annually. “People are not comfortable buying bonds amid so much uncertainty,” said Debendra Kumar Dash, senior vice president of treasury at AU Small Finance Bank, “There is growing fiscal concern, constant VRRR auctions by the central bank, and no clarity on a potential US-India trade deal.” While bond market participants rapidly sold positions, the government is optimistic that the country’s fiscal deficit target can still be achieved.