Mumbai: India’s benchmark 10-year bonds rose to the highest in a month on speculation that interest rates have peaked after the central bank on 24 April refrained from further raising borrowing costs.
10-year bonds gained a second day, their best run in two weeks, on speculation that the central bank may be able to slow inflation to its estimated range after increasing rates five times in the past one year. Inflation reduces the value of returns on fixed-income securities.
“The central bank’s move suggests the near-term outlook is positive for bonds,” said Rajesh Babu, a trader with state-owned Andhra Bank in Mumbai. “That has encouraged investors to build trading positions now. Prices may advance further.”
The yield on the benchmark 8.07% note due January 2017 fell 2-basis points, or 0.02% to 7.97% as of 5:30pm in Mumbai, according to the central bank’s trading system. It fell as low as 7.95%, the least since 23 March. The price rose 0.12, or 12 paise per Rs100 face amount, to 100.64. Yields move inversely to prices. “Bond yields may continue with their downward trajectory,” said Krishnamurthy Harihar, treasurer at Development Credit Bank Ltd in Mumbai.