India’s 10-year bond yield held at the lowest level in more than two weeks on speculation data due this week will show the economy grew at the slowest pace since 2009, adding pressure on the central bank to cut interest rates.
Gross domestic product expanded 5.3 percent from a year earlier in the first three months of this year, the slowest pace since the first quarter of 2009, and economists predict an Aug. 31 report will show the growth rate stayed at that level in the period ended June 30. The next monetary policy review is due on Sept. 17.
“Slowing economic growth is encouraging investors to add to their bond holdings,” said R.S. Chauhan, Mumbai-based chief dealer of fixed-income and currencies at State Bank of Bikaner & Jaipur. (SBBJ) “There is an expectation that the central bank will ease its policy.”
The yield on the 8.15 percent notes due June 2022 was unchanged from yesterday at 8.18 percent in Mumbai, according to the central bank’s trading system. That is the lowest level since Aug. 10.
The Reserve Bank of India kept the repurchase rate unchanged at 8 percent at a policy meeting on July 31, after cutting it by 50 basis points in April. Prime Minister Manmohan Singh’s economic panel this month cut the forecast for growth to 6.7 percent in the current fiscal year ending March 2013 from 7.6 percent predicted in February.
One-year interest-rate swaps, or derivative contracts used to guard against fluctuations in funding costs, fell one basis point, or 0.01 percentage point, to 7.78 percent, according to data compiled by Bloomberg.
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