Indian bonds due 2022 fell for a second week, pushing the yield to the highest level in 2 1/2 months, as the central bank signaled it will refrain from adding to this year’s two interest-rate cuts.
The Reserve Bank of India lowered its repurchase rate to 7.50 percent from 7.75 percent on March 19, and said room for further monetary easing was limited by “persisting” inflation. Demand for the notes slowed amid speculation the government will offer new 10-year bonds once the next fiscal year starts April 1, said Ganti N. Murthy, head of fixed income at Peerless Funds Management Co. in Mumbai.
“The RBI has indicated its hands are tied as inflation may remain stubborn,” said Murthy, who helps manage $866 billion in assets. “That is keeping yields at elevated levels.”
The yield on the 8.15 percent bonds due June 2022 rose 10 basis points, or 0.10 percentage point, this week to 7.96 percent in Mumbai, according to the central bank’s trading system. The rate rose three basis points today and is the highest since Jan. 3.
Wholesale-price inflation quickened to 6.84 percent in February from a year earlier, while consumer prices rose 10.91 percent, official data show.
The one-year interest-rate swap, a derivative contract used to guard against fluctuations in funding costs, rose four basis points, or 0.04 percentage point, from a week ago to 7.55 percent, according to data compiled by Bloomberg. The rate fell one basis point today.
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