India’s 10-year bonds completed their first weekly gain this month on speculation the central bank will cut cash-reserve requirements to revive the economy.
Policy makers will reduce the proportion of deposits that lenders must set aside by 25 basis points to 4.25 percent on Oct. 30, according to 10 of 17 economists surveyed by Bloomberg News. One predicted a 50 basis point cut while the rest see no change. Quarterly growth in India’s $1.8 trillion economy slowed to an average 5.4 percent in the first half, from 7.5 percent in the whole of 2011, according to government data.
“A cut in the CRR to infuse more liquidity in the system can’t be ruled out as growth is slowing,” said Vivek Rajpal, a fixed-income strategist in Mumbai at Nomura Holdings Inc. “Investors should stay long on government bonds.”
The yield on the benchmark 8.15 percent notes due June 2022 fell four basis points, or 0.04 percentage point, this week to 8.13 percent in Mumbai, according to the central bank’s trading system. The rate, which fell one basis point today, is the lowest since July 27.
The yield may decline to 7.80 percent by the end of January, Rajpal predicted.
The one-year interest-rate swap, derivative contracts used to guard against fluctuations in funding costs, fell three basis points to 7.60 percent, data compiled by Bloomberg show.
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