BackIndian bonds gain as yield falls from three-week high on inflows
The yield on the 8.83% notes due November 2023 dropped one basis point to 8.86%
Premium
Mumbai: India’s 10-year bonds rose, with the yield retreating from a three-week high, on optimism global funds will boost holdings of local debt after the elections handed a clear majority to the Bharatiya Janata Party (BJP).
The BJP, led by Narendra Modi, secured 282 seats, the biggest electoral victory for a single party since 1984. The party crossed the 272 figure needed for a majority, enabling it to pursue policies without being constrained by coalition politics. Overseas investors bought about a net $299 million of rupee-denominated bonds on Monday after pouring in $425 million in the five days through 16 May, which was a third straight week of inflows, according to the latest exchange data.
“The election result is expected to boost capital flows," said Vaidyanathan Iyer, Mumbai-based executive director at A.K. Capital Services Ltd. The market is also consolidating a bit after the recent declines.
The yield on the 8.83% notes due November 2023 dropped one basis point, or 0.01 percentage point, to 8.86% in Mumbai, prices from the central bank’s trading system show. It climbed 14 basis points in the past four days to the highest level since 25 April.
Ten-year bonds slumped last year, with the yield jumping 78 basis points in the biggest annual advance since 2009, as global investors pulled an unprecedented $8 billion from the rupee-debt market on the prospect of a US stimulus cut. They have plowed back $5.7 billion into local company and government securities so far in 2014, exchange data show.
The alliance headed by BJP, the main opposition party, is set to take power after Prime Minister Manmohan Singh’s Congress lost the national elections. Indian President Pranab Mukherjee appointed Modi as the nation’s prime minister and invited him to take the oath of office on 26 May, presidential spokesman Venu Rajamony said in a statement on Tuesday.
One-year interest-rate swaps, derivative contracts used to guard against swings in funding costs, fell two basis points to 8.49%, data compiled by Bloomberg show. Bloomberg
Unlock a world of Benefits! From insightful newsletters to real-time stock tracking, breaking news and a personalized newsfeed – it's all here, just a click away! Login Now!
