The recent tumble in Indian bonds that’s made them worst performers among major Asian nations this month need not spell a long-term rout.
Yields have climbed 25 basis points to 6.71% after the central bank’s decision on Dec. 5 to hold policy combined with worries over government borrowings. Traders say the sell-off may be overdone as the pause doesn’t necessarily mean the easing cycle has ended. “The sentiment is very negative at the moment but there is potential for positive news to have an asymmetrically positive reaction,” said Dushyant Padmanabhan, a strategist at Nomura Holdings Inc. in Singapore. “A smaller slippage or less-than-expected additional market borrowing, or even a drop in inflation could see yields fall sharply.”
