Bonds rise as Ahluwalia damps speculation on rate increase

Bonds rise as Ahluwalia damps speculation on rate increase
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First Published: Thu, Dec 24 2009. 12 19 AM IST
Updated: Thu, Dec 24 2009. 12 19 AM IST
Mumbai: The benchmark 10-year bonds rose for the third day after a government official quashed speculation that the Reserve Bank of India will raise interest rates before a January policy review.
Yields on the most-traded debt due 2020 fell after India’s Planning Commission deputy chairman Montek Singh Ahluwalia said on Tuesday that monetary policy is no solution to head off rising food prices, which climbed at the fastest pace in 11 years in the week to 5 December.
“The expectation is that the Reserve Bank of India may not act until the 29 January policy meeting,” said S. Srikumar, head of fixed income at state-owned Corporation Bank in Mumbai. “Credit growth is expanding at a very low pace, so the central bank will avoid any aggressive increase in rates to spur economic growth,” he said.
The yield on the 6.35% note due January 2020 fell two basis points to 7.55%, according to the central bank’s trading system. The price rose 0.14, or 14 paise per Rs100 face amount, to 91.66.
One basis point is one-hundreth of a percentage point.
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First Published: Thu, Dec 24 2009. 12 19 AM IST