India’s government bonds rose for a second day after the government reduced the size of debt auctions scheduled for this week by 30 billion rupees ($646 million), which may help ease a cash shortage. Yields fell to the lowest level in more than two weeks as the finance ministry said yesterday it will sell 100 billion rupees of notes maturing in seven, 12 and 30 years on July 2. Banks borrowed an average 461 billion rupees a day from the central bank through its repurchase-auction window this month. Last month, they lent a daily average of 328 billion rupees to the Reserve Bank of India. “The cut in the size of bond sales is a signal that policy makers are ready to tackle any problem on the liquidity front,” said Srinivasa Raghavan, head of fixed-income at IDBI Gilts in Mumbai. The yield on the 7.80 percent note due May 2020 dropped five basis points to 7.55 percent as of 9:30 a.m. in Mumbai, according to the central bank’s trading system. The rate earlier fell as much as six basis points to touch its lowest level since June 10. The price rose 0.31, or 31 paise per 100 rupee face amount, to 101.72. The government had indicated it may borrow 130 billion rupees between June 28 and July 2 in its debt-sale calendar published on March 29. The cost of one-year interest-rate swaps, or derivative contracts used to guard against fluctuations in borrowing costs, decreased. The rate, a fixed payment made to receive floating rates, was 5.53 percent, compared with 5.57 percent yesterday. To contact the reporter on this story: V. Ramakrishnan in Mumbai at rvenkatarama@bloomberg.net

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