Indian bond yields hold near one-week low as monsoon picks up
The yield on sovereign notes due November 2023 stood at 8.737%, the lowest level since 7 July
Mumbai: India’s 10-year bond yield held near the lowest level in more than a week as a pick-up in monsoon rains eased concern inflation will accelerate.
The shortfall in the June-September monsoon, which accounts for more than 70% of India’s annual precipitation, is 36% of the 50-year average, the weather department said on Wednesday. That compared with 43% on 11 July. Consumer price inflation was 7.31% in June, the lowest since the index was created at the start of 2012, official data showed this week. Wholesale prices rose 5.43% from a year earlier, the least in four months.
The yield on India’s sovereign notes due November 2023 was at 8.737% in Mumbai, compared with 8.724% on Wednesday, the lowest level since 7 July, according to the Reserve Bank of India’s (RBI’s) trading system.
“Things are not as bearish now as they looked a week back, thanks to positive inflation data and the slight improvement in the monsoon," said Sagar Shah, deputy vice-president for treasury at RBL Bank in Mumbai. “Ten-year yields will probably stay between 8.60% and 8.80% in the near term," he said.
RBI governor Raghuram Rajan has raised the benchmark repurchase rate by 75 basis points to 8% since taking charge in September to rein in price pressures. A weak start to the monsoon has delayed the planting of some crops, threatening to push up food costs that account for about half of the Consumer Price Index (CPI).
One-year interest-rate swaps, derivative contracts used to guard against swings in funding costs, rose one basis point, or 0.01%age point, to 8.41%, data compiled by Bloomberg show.
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