Bloomberg News

India Bond Yields at 1-Week Low on Speculation RBI Will Buy Debt

October 17, 2012

India’s 10-year bond yields held at a one-week low on optimism the central bank will buy government debt in the market to boost cash in the banking system and counter slowing economic growth.

Lenders borrowed 862.6 billion rupees ($16.3 billion) from the monetary authority’s overnight repurchase window today, the most this month, according to Reserve Bank of India data. Asia’s third-largest economy grew 5.5 percent in the three months through June, after expanding 5.3 percent in the previous quarter, the least since 2009.

“There is some speculation the RBI will resume buying government securities pretty soon to support growth,” said Arvind Chari, a senior fund manager at Quantum Asset Management Co. in Mumbai. “That’s keeping bonds supported.”

The yield on the benchmark 8.15 percent notes due June 2022 held at 8.15 percent in Mumbai, according to the central bank’s trading system.

Chari predicted the central bank will buy as much as 500 billion rupees of notes before the end of the financial year in March. The Reserve Bank has purchased 820 billion rupees of government securities so far this fiscal year.

The one-year interest-rate swap, derivative contracts used to guard against fluctuations in funding costs, fell one basis point to 7.61 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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