Mumbai: India’s bonds gained, snapping a six-day decline, as yields near the highest in almost two years attracted investors.
Benchmark 10-year notes advanced by the most in two weeks on speculation that banks and securities companies increased holdings to meet statutory requirements. Bonds also gained after crude oil had the biggest two-day loss since March, easing concerns inflation will accelerate.
“These are good levels to invest,” said Baljinder Singh, a trader at state-owned Andhra Bank in Mumbai. “Banks have investment requirements and 10-year bonds trading at a discount to the face value are attractive.”
The yield on the benchmark 8.24% note due April 2018 dropped 3.5 basis points to 8.26% at the 5.30pm close in Mumbai, according to the central bank’s trading system. The price increased 0.235, or 23.5 paise per Rs100 face amount, to 99.85. Hundred basis points make one percentage point.
The 10-year yield touched 8.31% on 9 June. It has risen 47 basis points this year.
Indian lenders are required by law to invest at least 25% of their deposits in government bonds or other low-risk debt securities approved by the central bank. Bank deposits increased 24% in the 12 months that ended on 23 May, the central bank said on 6 June.
Gains in bonds were capped by concern quickening inflation will reduce the appeal of debt. A government report on 13 June may show the inflation rate climbed to the highest in almost four years in the last week of May. Inflation will accelerate to 9% this month for the first time since 1995 after India raised fuel prices last week, said S. Ananthanarayan at Kotak Mahindra Bank Ltd.