Related News:
Bonds Have Second Monthly Loss on Concern Indian Interest Rates to Rise
India’s government bonds completed a second monthly loss on speculation the central bank will raise interest rates further to curb inflation.
The yield on the benchmark 10-year bond climbed to the highest level in almost three months after the Reserve Bank of India this week raised interest rates for a fourth time in 2010. Gains in the wholesale-price index averaged 10.4 percent in the first half of the year, compared with 2.2 percent in the whole of 2009, according to government data.
“The central bank may not be completely done with what is required to bring down inflation,” said Roy Paul, a deputy general manager at Federal Bank Ltd. in Mumbai. “That speculation is expected to keep demand for bonds weak.”
The yield on the 7.80 percent bond due in May 2020 was 7.80 percent as of the 5:30 p.m. close in Mumbai, according to the central bank’s trading system. The rate climbed 25 basis points this month and rose two basis points from yesterday. The price fell 1.7 rupees per 100 rupee face amount, to 99.97.
The Reserve Bank of India on July 27 raised the reverse- repurchase rate, at which it absorbs excess cash from banks, by half a point to 4.5 percent. It lifted the repurchase rate, which it charges on overnight loans, to 5.75 percent from 5.5 percent.
India needs “aggressive” monetary policy tightening to slow inflation, a central bank official said yesterday. “Monetary tightening has to be more aggressive,” the official, who declined to be identified because he isn’t authorized to speak to the media, said.
Inflation as measured by consumer prices paid by industrial workers was 13.73 percent in June, India’s labor ministry said in a statement today. The index was 13.91 percent in May.
The cost of one-year interest-rate swaps, or derivative contracts used to guard against fluctuations in borrowing costs, increased this month. The rate, a fixed payment made to receive floating rates, advanced to 6.37 percent from 5.47 percent a month ago.
To contact the reporter on this story: Anoop Agrawal in Mumbai at aagrawal8@bloomberg.net; V. Ramakrishnan in Mumbai at rvenkatarama@bloomberg.net
Rate These Stories
Rate this Page