Mumbai: India’s 10-year bonds rose the most in four weeks after yields at their highest in 15 months attracted some buyers.
Yields fell for a second day after food inflation decelerated to 17.28% in the week to 2 January from a year earlier. The prices rose 19.95% last month, the fastest pace since 1998. Yields also fell because the government is nearing completion of its record borrowing of Rs4.51 trillion for the current fiscal ending 31 March, said Krish Ramkumar, who manages the equivalent of $1 billion (Rs4,500 crore) Indian debt at Sundaram BNP Paribas Asset Management Co. in Mumbai.
Bond prices have risen because these were good levels to buy, said Ramkumar. While food prices dropped, wholesale price inflation was on expected lines and that encouraged investors.
The yield on the 6.35% note due January 2020 fell 8 basis points to 7.63% at close, according to the central bank’s trading system. The price rose 0.55, or 55 paise per Rs100 face amount, to Rs90.20. Earlier, it touched 7.74%, the highest rate for a benchmark 10-year note since October 2008.
RBI will auction Rs10,000 crore of bonds maturing in 2016, 2020 and 2027 on Friday. The Reserve Bank of India is scheduled to auction Rs15,000 crore of bonds in the remainder of this fiscal, following this week’s debt sales.
Earlier, bonds fell after RBI deputy governor Subir Gokarn said on Tuesday the central bank won’t risk inflation getting out of hand. Some monetary tightening in India may be appropriate, C. Rangarajan, Prime Minister Manmohan Singh’s economic adviser said the same day.