Fixed-income traders have swung from joy to misery within the span of two weeks as the global bond rally passes them by.
Rupee-denominated sovereign bonds have lost more than half the gains they made since the government’s July 5 budget, as concern rises that authorities may sell more debt to finance further fiscal stimulus.
Confusion over plans to shift part of Rs 7-trillion ($100 billion) borrowing abroad is adding to the negative sentiment, along with weakness in the rupee, which is Asia’s worst-performing currency this month.
“Uncertainty is really killing the markets,” said Lakshmi Iyer, Chief Investment Officer for Fixed Income at Kotak Mahindra Asset Management, who’s turned to corporate debt and short-term bonds for shelter. “While bond yields globally are declining and heading toward negative territory, bonds are less enthused.”
The yield on benchmark 10-year sovereign bonds rose 3bps on Tuesday to 6.62 per cent, adding to an increase of more than 20 bps over the last two weeks.
