New Delhi: India’s 10-year bonds rose, pushing yields to the lowest in more than four months, on speculation banks used surplus funds to buy debt.
The securities gained as a decline in borrowing costs in the interbank money market suggested funds are more easily available for investors. Bonds also rose following gains in US treasuries on speculation that a deepening housing slump will slow growth in the world’s biggest economy, boosting odds of an interest-rate cut by the Federal Reserve.
“The rally we’re seeing here is driven by liquidity,” said Poonam Tandon, a senior trader at Development Credit Bank Ltd in Mumbai.
The yield on the 8.07% note due in January 2017 fell one basis point, or 0.01 percentage point, to 7.94% as of the 5:30pm close in Mumbai, according to the central bank’s trading system. The price of the security rose 0.08, or eight paise per 100-rupee face amount, to 100.85. Yields move inversely to prices.
The rate at which banks lend to each other overnight averaged 0.6% this month, reducing the cost of funds from an average 2.4% in June. Banks have more cash left after meeting lending and spending needs, as the central bank purchases dollars and injects rupees to stem currency gains. Bloomberg