India’s 10-year bonds gained for a second day, pushing the yield to a one-week low, on speculation the central bank will resume open-market debt purchases to help ease a cash squeeze.
Local lenders borrowed an average 917 billion rupees ($16.5 billion) a day from the central bank so far this month to meet shortages, compared with 671 billion rupees in October, official data show. The Reserve Bank of India, which has bought 820 billion rupees of debt since April 1 to boost the availability of funds, last held an auction to purchase securities in June.
“Bonds have advanced due to expectations of purchases by the RBI,” said Rajeev Radhakrishnan, a fund manager in Mumbai SBI Funds Management Pvt. “Liquidity is tight and the pressure could be aggravated by tax payments by companies next month.”
The yield on the 8.15 percent government notes due June 2022 was 8.196 percent as of 9:45 a.m. in Mumbai, compared with 8.203 percent yesterday, according to the central bank’s trading system. The rate dropped three basis points, or 0.03 percentage point, yesterday, the most since Sept. 5.
RBI Deputy Governor H.R. Khan said on Nov. 25 that the central bank will act if the cash squeeze persisted.
The one-year interest-rate swap, a derivative contract used to guard against fluctuations in funding costs, was little changed at 7.76 percent, data compiled by Bloomberg show.
To contact the reporter on this story: V. Ramakrishnan in Mumbai at firstname.lastname@example.org
To contact the editor responsible for this story: James Regan at email@example.com