Bloomberg News

Indian Bonds Fall a Third Day as Output Growth Beats Estimates

January 12, 2012

Jan. 12 (Bloomberg) -- India’s 10-year bonds fell for a third day as government data showed factory output rose faster than economists forecast, tempering speculation the central bank will lower interest rates this month.

Yields rose to a one-week high as the Central Statistical Office said in New Delhi that industrial production increased 5.9 percent in November from a year earlier. The median of 27 estimates in a Bloomberg News survey was for a 2.1 percent gain. The nation will sell 140 billion rupees ($2.7 billion) of notes due in 2020, 2024 and 2030 tomorrow. The central bank is due to review borrowing costs on Jan. 24.

“There is little chance of a rate cut this month as the economy seems to be doing well,” said Krishnamurthy Harihar, treasurer in Mumbai at FirstRand Ltd. “Unabated debt supplies are also weighing bonds down.”

The yield on the 8.79 percent bonds due November 2021 rose two basis points, or 0.02 percentage point, to 8.25 in Mumbai in Mumbai, according to the central bank’s trading system. That is the highest level since Jan. 5.

The Reserve Bank of India boosted its repurchase rate by 3.75 percentage points in the last two years to 8.5 percent to cool inflation. The government increased its borrowing target for the year through March by 8.5 percent last month to a record 5.1 trillion rupees.

The cost of one-year interest-rate swaps, or derivative contracts used to guard against fluctuations in funding costs, fell one basis point to 7.87 percent, according to data compiled by Bloomberg.

--Editors: Anil Varma, Abhay Singh

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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