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India’s benchmark bonds were little changed, with yields near a one-week low, on speculation slowing economic growth will prompt the central bank to cut reserve requirements for lenders.
The Reserve Bank of India has reduced the amount of funds banks must set aside as reserves by 125 basis points to 4.75 percent in 2012. Asia’s third-largest economy probably expanded 6.7 percent in the fiscal year that ended March, compared with 8.4 percent in the previous 12 months, according to the median estimate of analysts in a Bloomberg survey before a May 31 report. Brent crude oil has dropped 15 percent to $106.97 a barrel since March.
“The outlook for bonds is positive as the economy is slowing,” said Debendra Kumar Dash, a fixed-income trader at Development Credit Bank in Mumbai. “Falling oil prices are also a good development.”
The yield on the government’s 8.79 percent bonds due November 2021 was 8.52 percent in Mumbai, according to the central bank’s trading system.
One-year interest-rate swaps, or derivative contracts used to guard against fluctuations in funding costs, fell three basis points, or 0.03 percentage point, to 7.95 percent, according to data compiled by Bloomberg.
India’s central bank next meets to set monetary policy on June 18.
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