Bloomberg News

India 10-Year Bond Yield at 27-Month Low on Rate-Cut Speculation

January 13, 2013

India’s 10-year bonds advanced, pushing the yield to the lowest level in 27 months, on speculation the central bank will cut interest rates.

The Reserve Bank of India will lower the repurchase rate by 50 basis points to 7.5 percent by the end of March, according to 11 of 22 analysts surveyed by Bloomberg. Wholesale prices probably rose 7.37 percent in December from a year earlier, near the 10-month low of 7.24 percent in November, according to a Bloomberg survey before a report due today. Industrial output fell 0.1 percent in November from a year earlier, after rising 8.3 percent the month before, government data showed on Jan. 11.

“Concerns over growth may prompt the central bank to ease its policy in the coming months,” said N.S. Venkatesh, Mumbai- based head of treasury at state-run IDBI Bank Ltd. “Inflation is also softening to comfortable levels.”

The yield on the 8.15 percent bonds due June 2022 fell one basis point, or 0.01 percentage point, to 7.86 percent as of 10:01 a.m. in Mumbai, according to the central bank’s trading system. That is the lowest level for a benchmark 10-year security since September 2010.

Eight of the economists surveyed on the repurchase rate see a 25 basis point reduction by the end of this quarter. Of the remaining three, UBS AG forecasts a 100 basis point cut, Westpac Banking Corp. predicts the rate will be held, while Woori CBV Securities Corp. sees a quarter of a percentage point increase. The next policy review is on Jan. 29.

The one-year interest-rate swap, a derivative contract used to guard against fluctuations in funding costs, fell one basis point to 7.53 percent, data compiled by Bloomberg show.

To contact the reporters on this story: V. Ramakrishnan in Mumbai at rvenkatarama@bloomberg.net; Jeanette Rodrigues in Mumbai at jrodrigues26@bloomberg.net

To contact the editor responsible for this story: James Regan at jregan19@bloomberg.net


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