India’s bonds gained, lowering the 10-year yield from the highest level since August, as an unexpected drop in factory output spurred bets the central bank will loosen policy to support growth.
Industrial production decreased 0.4 percent in September from a year earlier, compared with a 2.8 percent gain predicted in a Bloomberg survey of economists. The benchmark wholesale- price inflation index rose 7.9 percent in October from a year earlier, the most in 2012, according to the median of 28 estimates in a separate survey before data due Nov. 14. Indian markets will be shut the next two days for holidays.
“It was an ugly print and is likely to raise expectations of earlier action by the Reserve Bank of India, especially if accompanied by weaker inflation,” said Anubhuti Sahay, an economist at Standard Chartered Plc in Mumbai. “However, it is important to remember industrial production data have been erratic in the past. We will focus on the wholesale-price inflation number.”
The yield on the benchmark 8.15 percent government bonds due June 2022 dropped one basis point, or 0.01 percentage point, to 8.21 percent as of 12:15 p.m. in Mumbai, according to the central bank’s trading system. The rate touched 8.22 percent earlier, the highest level since Aug. 31.
The Reserve Bank of India has kept its repurchase rate at 8 percent since April, citing price pressures. The monetary authority raised its inflation forecast for March 2013 to 7.5 percent last month from an earlier estimate of 7 percent. Standard Chartered predicts the central bank will cut interest rates in the first quarter of 2013 to support growth.
The one-year interest-rate swap, a derivative contract used to guard against fluctuations in funding costs, fell one basis point to 7.77 percent, data compiled by Bloomberg show.
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