The Reserve Bank of India, or RBI, cancelled part of its short-dated government bond sale at Friday's auction, the first such move in nearly a year, amid rising bond yields. The RBI accepted bids for only 45.06 billion rupees, or about 471.12 million dollars, of the 3-year government bond carrying a 6.20% coupon and maturing in 2029, slightly more than 40% of the 110 billion rupees the government planned to raise through the issue. The RBI also sold 7-year bonds at a yield slightly above market expectations, while a new 30-year bond priced at auction in line with market estimates. For the 3-year bond, the yield stood at 6.4566%, up 25 basis points over the four weeks since the bond was first issued, while a Reuters poll before the auction had projected a cut-off yield of 6.45%. A trader at a state-run bank said the decision may be a clear signal that authorities believe the market is reflecting too negative a view on the interest rate outlook, and that it could help ease investor concerns, estimating that if the RBI proceeds to sell the full targeted amount, yields could test the 6.50% level. Pressure on the Indian bond market has intensified after military tensions in the Middle East escalated, pushing oil prices higher and adding to pressure on bond yields, which have been on an upward trend for several weeks. Recent U.S. economic data have also increased bets that the Federal Reserve, or Fed, will raise interest rates at next week's meeting, pushing the 10-year U.S. Treasury yield close to 5% and weighing on bond markets worldwide. The last time the RBI cancelled part of a government bond auction was in October 2025, after investors demanded yields well above the level authorities deemed acceptable.
Article notes recent U.S. data boosted bets the Fed will raise rates, pushing the 10-year U.S. Treasury yield close to 5% — a rise in the yield itself.
