Mumbai: The benchmark bonds gained for an eighth day, pushing yields to a nine-week low, as crude oil’s decline eased concern that inflation will accelerate.
Ten-year yields fell to the lowest since 27 June after oil prices declined almost 6% this week to near a five-month low. Inflation in Asia’s third largest economy eased from the fastest in 16 years, a government report showed on 28 August.
“Easing prices of commodities, mainly oil, has helped ease inflation concerns and improve the bond-market sentiment,” said Navneet Munot, executive director in Mumbai at Morgan Stanley Investment Management.
The yield on the benchmark 8.24% note due April 2018 fell 1 basis point to 8.61% at the 5.30pm close in Mumbai, according to the central bank’s trading system. The price rose 7 paise per Rs100 face amount, to Rs97.61. A basis point is 0.01 percentage point.
Oil prices declined after hurricane Gustav weakened before striking the Louisiana coast in the US, easing concern that it would damage rigs and refineries in its path. Meanwhile, the cost of benchmark interest-rate swaps, or derivative contracts used to guard against rate fluctuations, dropped for a fourth day. The five-year swap rate, a fixed payment made to receive floating rates, fell to 8.78%, the lowest since 18 June, from 8.88% on Monday.