Bloomberg News

India 10-Year Bond Yield at 1 1/2-Week High on Inflation Concern

September 28, 2011

Sept. 28 (Bloomberg) -- India’s 10-year bond yield rose to the highest level in 1 1/2 weeks on speculation the central bank will keep monetary conditions tight after Governor Duvvuri Subbarao said inflation remains above the comfort level.

The finance ministry may decide on the government’s debt sale calendar tomorrow for the six months starting Oct. 1, a ministry official with direct knowledge of the matter said on Sept. 26. The government has completed 60 percent of its 4.17 trillion rupees ($86 billion) borrowing target for the fiscal year that began April 1. Inflation has been “fairly stubborn,” Subbarao said on Sept. 26.

“Inflation is still at elevated levels and the central bank’s tone continues to be hawkish,” said Anoop Verma, a fixed-income trader at Development Credit Bank Ltd. in Mumbai. “Investors are also staying on the sidelines for clarity on the borrowing calendar.”

The yield on the 7.8 percent securities due April 2021 rose 2 basis points to 8.34 percent at the 6 p.m. close in Mumbai, according to the central bank’s trading system. That’s the highest level since Sept. 16. A basis point is 0.01 percentage point. The central bank extended trading by an hour today after selling 100 billion rupees of treasury bills.

India’s benchmark wholesale-price inflation accelerated to a 13-month high of 9.78 percent in August. The central bank has boosted borrowing costs six times this year, lifting the repurchase rate to 8.25 percent.

--With assistance from Jeanette Rodrigues in Mumbai. Editors: Abhay Singh, Sam Nagarajan

To contact the reporter on this story: V Ramakrishnan in Mumbai at rvenkatarama@bloomberg.net

To contact the editor responsible for this story: Sandy Hendry at shendry@bloomberg.net


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