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India’s 10-Year Bonds Little Changed Ahead of RBI Policy Review

January 22, 2013

India’s benchmark bonds were little changed on speculation investors scaled back investments before a central bank policy review.

The benchmark 10-year yield fell 19 basis points this month, the most since May, after the inflation rate dropped to a three-year low in December. The pace of price increases was still high, Reserve Bank of India Governor Duvvuri Subbarao said last week. Eleven of 14 analysts in a Bloomberg survey predict the RBI will cut its repurchase rate by 25 basis points to 7.75 percent at a Jan. 29 review, while two forecast a 50 basis point reduction and one sees no change.

“Inflationary concerns still persist and I see an equal chance of either a 25 basis point cut in the repo rate or a pause next week,” said J. Moses Harding, an executive vice president at IndusInd Bank in Mumbai.

The yield on the 8.15 percent bonds due June 2022 was at 7.86 percent as of 10:25 a.m. in Mumbai, according to the central bank’s trading system. The rate touched 7.80 percent on Jan. 14, the lowest level for a benchmark 10-year bond since July 2010.

The repurchase rate was last lowered by half a percentage point in April. The wholesale-price index rose 7.18 percent in December from a year earlier, the smallest increase since 2009, government data showed last week. The RBI considers an inflation rate between 4 percent and 5 percent as a comfortable level, Deputy Governor K.C. Chakrabarty said on Nov. 15.

The one-year interest-rate swap, a derivative contract used to guard against fluctuations in funding costs, fell one basis point to 7.55 percent in Mumbai, according to data compiled by Bloomberg.

To contact the reporter on this story: V. Ramakrishnan in Mumbai at

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

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