According to dealers, Indian private sector banks purchased the most government bonds in a single session in seven years on Friday, including a huge buy on behalf of a business

According to Clearing Corp of India data, these banks purchased bonds worth a total of 83.43 billion rupees ($1 billion), the largest such buy since Nov. 15, 2016. This increased overall purchases to more than 200 billion rupees in November, following net sales of 101 billion rupees in October.

Traders believe a huge firm purchased the benchmark paper for roughly 50 billion rupees through a private sector bank.

"Though Friday's purchase consists of buying for a constituent client, private banks have been increasing purchases for their own books as they hold a chunky share of maturing papers, and this money needs to be deployed," a top treasury officer at a private bank stated

Over the following month, inflows of almost 1.7 trillion rupees are expected as the 8.83% 2023, 4.56% 2023, and 7.68% 2023 papers mature. According to another treasury source, the majority of the money is re-invested in liquid papers such as the five-year and benchmark 10-year paper. Improving macroeconomic conditions are also contributing to the increase in bond purchases.

"In the United States, data has begun to deteriorate and treasury yields have fallen, indicating that the rate cycle has peaked," said Alok Singh, group treasury head at CSB Bank.

According to Singh, this is also causing an upsurge in trading activity from private banks. In November, the 10-year US Treasury yield fell by more than 55 basis points to approximately 4.45%.

Traders also stated that expectations of the central bank selling debt have decreased as liquidity remains tight, enhancing purchasing sentiment. The RBI did not sell bonds in the secondary market in the week ending Nov. 10, after selling 185 billion rupees in the previous ten weeks.