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Update: India 2030 bonds reverse losses as govt meets auction goal

[MUMBAI] India's government met its target at Friday's bond sale, allaying concern demand for sovereign debt is weakening after primary dealers stepped in to rescue the last two auctions.

The yield on the 7.88 percent notes due March 2030 dropped three basis points to 7.93 percent as of 3:31 pm in Mumbai, according to prices from the central bank's trading system. It rose to as high as 7.98 per cent before the auction results. The yield on bonds due May 2025, the current 10-year benchmark, also declined three basis points to 7.73 per cent.

The administration sold 140 billion rupees (S$2.99 billion) of securities, including 60 billion rupees of notes due 2030, as sales resumed after a two-week break. Benchmark 10-year yields capped their biggest quarterly advance since 2013 on Thursday as worries India will struggle to meet budget-deficit targets soured investor sentiment. The nation granted global funds access to an additional 165 billion rupees of sovereign and state-government bonds from Jan 1, part of a plan to increase foreign-investment limits in phases.

"The bond market drew comfort from the fact that the auction went through smoothly," said Ajay Manglunia, Mumbai- based head of fixed income at Edelweiss Financial Services Ltd. "Investors are also relieved that some part of the debt supply will get absorbed as new foreign-investment limits take effect, easing the pressure on bonds." The government raised 150 billion rupees at the previous auction on Dec 11 with the help of primary dealers, who bought the unsold debt as demand faltered.

The rupee fell 0.1 per cent on Friday to 66.22 a dollar, prices from local banks compiled by Bloomberg show. The currency weakened 4.7 per cent last year in its fifth straight annual decline, the longest stretch since 2001.