Bloomberg News

India’s Swaps Fall Toward One-Week Low on Rate-Cut Speculation

June 19, 2013

India’s interest-rate swaps fell toward a one-week low on speculation easing inflation will create room for the central bank to add to three interest-rate cuts this year.

Inflation, as measured by the wholesale-price index that is frequently used for policy decisions, touched a 43-month low of 4.7 percent in May, official data showed last week. The phrase, “room for further easing quite limited,” was dropped from the central bank’s June 17 monetary policy report, a sign a more neutral stance is being adopted, Barclays Plc Singapore-based analysts Igor Arsenin and Rohit Arora wrote in a note today.

The one-year interest-rate swap, a derivative contract used to guard against fluctuations in funding costs, fell one basis point, or 0.01 percentage point, to 7.22 percent as of 10:05 a.m. in Mumbai, data compiled by Bloomberg show. The rate touched 7.185 percent on June 17, the lowest level since June 7.

“The central bank’s tone in this policy wasn’t as hawkish as it has been in the recent past,” said Srinivasa Raghavan, the Mumbai-based executive vice president of treasury at Dhanalaxmi Bank Ltd. “With inflation showing signs of easing, the central bank will act sooner or later to spur growth.”

Asia’s third-largest economy grew 5 percent in the year ended March 31, the least in a decade, official data show. Central bank Governor Duvvuri Subbarao kept the repurchase rate unchanged at 7.25 percent on June 17 after cutting by 75 basis points this year. The RBI will next review policy on July 30.

The yield on 8.15 percent government bonds due June 2022 rose one basis point to 7.49 percent, according to the central bank’s trading system.

To contact the reporter on this story: Shikhar Balwani in Mumbai at

To contact the editor responsible for this story: James Regan at

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