India’s 10-year bonds advanced for a third day on speculation the central bank will ease monetary policy to arrest an economic slowdown.
A government report this week will show industrial output rose 1.8 percent in May from a year earlier, compared with an average gain of 2.6 percent in the previous 12 months, according to a Bloomberg survey of economists. The Reserve Bank of India cut its repurchase rate by 50 basis points to 8 percent in April, after raising it by a record 375 basis points through 2010 and 2011 to curb inflation. The monetary authority will review its policy next on July 31.
“Yields will have a tendency to drop from here given the weak economic outlook,” said Anoop Verma, a fixed-income trader at Development Credit Bank in Mumbai.
The yield on the 8.15 percent notes due June 2022 fell one basis point, or 0.01 percentage point, to 8.14 percent as of 9:50 a.m. in Mumbai, according to the central bank’s trading system. That’s the lowest level since June 28.
Central bank Governor Duvvuri Subbarao kept the repo rate unchanged at 8 percent at a meeting on June 18.
One-year interest-rate swaps, or derivative contracts used to guard against fluctuations in funding costs, were little changed at 7.76 percent, according to data compiled by Bloomberg.
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