Bloomberg News

India’s Bonds Halt Decline on Speculation Yields Luring Buyers

September 29, 2011

Sept. 29 (Bloomberg) -- India’s 10-year bonds snapped a three-day losing streak on speculation yields near the highest level in almost two weeks will lure buyers.

Benchmark 10-year yields have jumped 35 basis points since the beginning of the fiscal year on April 1 as inflation stayed above 9 percent during the period, official data show. The central bank has raised the repurchase rate by 1 percentage point since April to 8.25 percent. Wholesale-price inflation accelerated to a 13-month high of 9.78 percent in August.

“There are no new known risks that the market is concerned about,” said Roy Paul, a Mumbai-based deputy general manager of treasury at Federal Bank Ltd. “So yields may curb the rise.”

The yield on the 7.8 percent securities due April 2021 dropped one basis point, or 0.01 percentage point, to 8.34 percent as of 9:20 a.m. in Mumbai, according to the central bank’s trading system. The rate reached 8.35 percent yesterday, the highest level since Sept. 16.

Consumer-price gains in the world’s second-most populous nation remain above the level the central bank deems acceptable, Governor Duvvuri Subbarao said this week.

“Inflation has been fairly stubborn,” Subbarao said in New York Sept. 26. “Above a threshold, you can’t accept high inflation to have higher growth.”

The cost of one-year interest-rate swaps, or derivative contracts used to guard against fluctuations in borrowing costs, dropped two basis points to 7.85 percent, according to data compiled by Bloomberg.

--Editors: Andrew Janes, Ven Ram

To contact the reporters on this story: Anoop Agrawal in Mumbai at aagrawal8@bloomberg.net

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


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