Bloomberg News

India’s Bonds Gain on Speculation RBI Will Halt Rate Increases

November 23, 2011

Nov. 23 (Bloomberg) -- India’s 10-year bonds rose, pushing yields to the lowest level in almost a week, on speculation the central bank will halt interest-rate increases as economic growth slows.

Factory output in Asia’s third-largest economy grew 1.9 percent in September from a year earlier, the slowest pace in two years, official data showed this month. The Reserve Bank of India has increased borrowing costs 13 times since the start of 2010 to damp inflation. The repurchase rate is 8.5 percent. The next policy review is on Dec. 16.

“Investors are taking a view that the RBI may pause rate hikes given growth concerns,” said Krishnamurthy Harihar, treasurer at FirstRand Ltd. in Mumbai. “That’s driving yields down.”

The yield on the 8.79 percent bond due November 2021 fell three basis points, or 0.03 percentage point, to 8.81 percent in Mumbai, according to the central bank’s trading system.

The cost of one-year interest-rate swaps, or derivative contracts used to guard against fluctuations in borrowing costs, fell one basis point to 8.14 percent, according to data compiled by Bloomberg.

--Editor: Anil Varma

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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