India’s new 10-year bonds gain as inflation concern eases on oil
RBI will study data, including food prices and exchange-rate depreciation, before deciding whether to increase benchmark rate a third time
Mumbai: India’s new 10-year bonds advanced on speculation a drop in oil prices will help cool inflation and reduce pressure on the central bank to raise interest rates.
Brent crude sank as much as 2.7% on Monday after Iran agreed to limit its nuclear programme in return for easing some economic sanctions imposed by developed nations. Wholesale prices in India, which imports about 80% of its oil, rose 7% in October from a year earlier, the fastest pace since February, data showed this month. The rupee strengthened 0.6% today, the most among Asian currencies.
“The currency’s appreciation is providing some relief to the bond markets on the inflation front," said Srinivasa Raghavan, Mumbai-based executive vice-president of treasury at Dhanlaxmi Bank Ltd. “We’re also seeing gains as there is less supply in the newly issued 10-year bond."
The yield on the 8.83% notes due November 2023, which were first issued on 22 November, fell three basis points, or 0.03 percentage point, to 8.75% in Mumbai, according to prices from the central bank’s trading system. The yield on the 7.16% bonds due May 2023 dropped to 9.09% from a three-month high of 9.10% at the end of last week.
The Reserve Bank of India (RBI) will study data, including food prices and exchange-rate depreciation, before deciding whether to increase the benchmark rate for a third straight meeting, governor Raghuram Rajan said on 13 November. He raised the key repurchase rate by 25 basis points to 7.75% on 29 October, the second consecutive increase, to curb inflation.
The one-year interest-rate swap, a derivative contract used to guard against fluctuations in funding costs, declined four basis points to 8.58%, according to data compiled by Bloomberg. Bloomberg
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