India’s benchmark bonds gained on speculation the central bank will reduce the cash reserve ratio again to ease a cash shortage in the banking system.
Lenders borrowed a record 1.92 trillion rupees ($39 billion) at the Reserve Bank of India’s repurchase auction yesterday, according to RBI data, three times the maximum of 600 billion rupees favored by the monetary authority. The amount lent by the monetary authority today was 1.71 trillion rupees. The central bank cut the amount of deposits lenders must set aside as reserves to 5.5 percent from 6 percent on Jan. 24, the first reduction since 2009.
“Given the tight cash conditions, a reserve ratio cut is inevitable,” said M. Natarajan, the Mumbai-based head of treasury at Bank of Nova Scotia. (BNS)
The yield on the 8.79 percent notes due in November 2021 fell one basis point, or 0.01 percentage point, to 8.23 percent in Mumbai, according to the central bank’s trading system. The rate was little changed this week.
The central bank, which has bought 1 trillion rupees of fixed-income securities since November, purchased 107.76 billion rupees of government notes today, according to a statement.
The RBI will lower the reserve ratio by a further 100 basis points in the fiscal year ending March 31, 2013, the Goldman Sachs’ economists Tushar Poddar and Prakriti Shukla wrote in a research note today, compared with an earlier estimate of 50 basis points.
One-year interest-rate swaps, or derivative contracts used to guard against fluctuations in funding costs, fell one basis point to 8.16 percent, according to data compiled by Bloomberg.
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