India’s bonds rose for a second day after the central bank said yesterday it will purchase sovereign notes at an open-market auction this week to help the government sell a record amount of debt.
Yields on securities due 2021 fell to the lowest level in almost a month as the Reserve Bank of India plans to buy a total of 120 billion rupees ($2.2 billion) of bonds maturing in 2018, 2021, 2022 and 2027 on May 18, according to a statement.
“The central bank’s efforts are boosting liquidity that’s needed to see the government’s debt-sale plan through,” said R.S. Chauhan, Mumbai-based chief dealer for fixed income and currencies at State Bank of Bikaner & Jaipur. “I think the RBI will continue such steps to help yields decline.”
The yield on the 8.79 percent notes due November 2021 declined four basis points, or 0.04 percentage point, to 8.48 percent as of 9:33 a.m. in Mumbai, according to the central bank’s trading system. That’s the lowest since April 19.
Bonds also gained on optimism a drop in oil prices will slow inflation.
Crude prices have lost 4.5 percent this year to trade at $94.36 per barrel in New York, according to data compiled by Bloomberg. Inflation in India, which imports almost 80 percent of fuel it uses, averaged 7.1 percent this year, compared with 7.7 percent for the whole of 2011.
The cost of one-year interest-rate swaps, or derivative contracts used to guard against fluctuations in funding costs, dropped one basis point to 8.02 percent, according to data compiled by Bloomberg.
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