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India Bonds Decline a Second Day Before Rate Review This Week

India’s 10-year bonds fell, pushing yields to the highest level in almost two weeks, on speculation the central bank will boost borrowing costs this week.

The Reserve Bank of India will increase the repurchase rate by 25 basis points to 7.5 percent on June 16, according to 15 of 17 economists in a Bloomberg survey. Two predict no change. Wholesale-price inflation will accelerate to 8.74 percent in May from 8.66 percent in April, according to the median estimate of economists surveyed by Bloomberg before data due around noon local time.

“The overall conditions are still bearish for bonds as inflation concerns continue to persist,” said Killol Pandya, who manages $300 million as the Mumbai-based head of fixed income at Daiwa Mutual Fund. “The central bank may raise rates again.”

The yield on the 7.8 percent notes due April 2021 rose five basis points, or 0.05 percentage point, to 8.29 percent as of 9:53 a.m. in Mumbai, according to the central bank’s trading system. That was the highest since June 1.

The cost of one-year interest-rate swaps, or derivative contracts used to guard against fluctuations in borrowing costs, rose seven basis points to 7.96 percent.

To contact the reporter on this story: V Ramakrishnan in Mumbai at rvenkatarama@bloomberg.net

To contact the editor responsible for this story: Sandy Hendry at shendry@bloomberg.net

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