government bond: For 32 minutes, everything was quiet in India’s bond market

By Subhadip Sircar and Kartik GoyalThe first signs that India’s $790 billion sovereign bond market is cracking under the strain of the coronavirus pandemic showed up on Tuesday.

For half an hour after trading started, nobody bought or sold a bond on the Reserve Bank of India’s platform. Volumes at the mid-day was just 6.55 billion rupees ($86 million), compared with the year’s daily average of 453 billion rupees.

The collapse in trading mirrors the empty streets of Mumbai after the government locked down the nation’s financial hub in a desperate attempt to contain the virus. Even before emergency measure, a freeze in credit markets have been sapping confidence and prompting ever stringent calls from investors for the Reserve Bank of India to do more.

“It seems bid and ask spreads are practicing social distancing,” said Arvind Chari, head of fixed income and alternatives at Quantum Advisors in Mumbai. “The market is viewing RBI’s actions as piecemeal as compared to the large steps taken by global central banks.”

The risks of a credit freeze or market freeze are growing, he said.



The RBI has done two forex swaps providing about $2.7 billion of dollar liquidity and announced bond purchases through open market operations.

Those measures have done little to tame surging bond yields.

The benchmark 10-year yield has risen 33 basis points points since falling to 5.99% in early March, which was the lowest in a decade. Sales of corporate bonds have dwindled. A top rated state-run lender failed to sell a bond this week in a sign of financing difficulties faced by the nation’s firms.

Adding to the market stress, the state of Maharashtra, where Mumbai is located, has the highest number of virus infections. A large number of traders are either working from home or back-up sites for many banks.

“These are unprecedented times, with lock-downs and curfews,” said Anoop Verma, vice president for treasury at DCB Bank Ltd. “That has hit trading in a big way. The idea is now to do the bare minimum.”

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