Bloomberg News

India’s Bonds Advance as Yields at 2-Week High Attract Investors

October 16, 2012

India’s 10-year bonds gained for the first time in five days on speculation yields at the highest level in two weeks will lure buyers.

Bonds rose on optimism the central bank will resume debt purchases to boost cash availability in the banking system and spur growth, according to Srinivasa Raghavan, an executive vice president at Dhanlaxmi Bank Ltd. (DHLBK) Asia’s third-largest economy grew 5.5 percent in the three months through June, government data show, after expansion of 5.3 percent in the previous quarter, the least since 2009.

“Investors were buying probably because the yield levels were attractive,” Mumbai-based Raghavan said. “Possibility of open market auctions to buy bonds are also there.”

The yield on the benchmark 8.15 percent notes due June 2022 fell two basis points to 8.15 percent in Mumbai, according to the central bank’s trading system.

Raghavan predicted the central bank will buy as much as 700 billion rupees ($13.2 billion) of notes in the remainder of this fiscal year ending March.

The Reserve Bank of India has bought 820 billion rupees of government securities so far this fiscal year.

One-year interest-rate swaps, or derivative contracts used to guard against fluctuations in funding costs, fell one basis point to 7.62 percent, data compiled by Bloomberg show.

To contact the reporter on this story: V. Ramakrishnan in Mumbai at rvenkatarama@bloomberg.net

To contact the editor responsible for this story: Amit Prakash at aprakash1@bloomberg.net


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