India’s 10-Year Bond Yields Near Two-Month Low on Rate Outlook

India’s 10-year bond yields were near a two-month low on speculation slowing economic growth will prompt the central bank to halt interest-rate increases.

Factory output decreased 0.7 percent in October from a year earlier after rising 1.9 percent in September, according to the median forecast of 24 economists in a Bloomberg survey before data due today. It would be the first contraction since June 2009. The central bank has boosted its repurchase rate by 3.75 percentage points to 8.50 percent since the start of 2010, the most among Asia’s 10 biggest economies. The Reserve Bank of India is scheduled to review its policy rate on Dec. 16.

“There is little chance of further rate increases,” said Debendra Kumar Dash, a fixed-income trader at Development Credit Bank in Mumbai. “That expectation is keeping yields lower.”

The yield on the 8.79 percent bonds due November 2021 rose one basis point, or 0.01 percentage point, to 8.54 percent as of 9:50 a.m. in Mumbai, according to the central bank’s trading system. The rate dropped to 8.52 percent on Dec. 8, the lowest level for a benchmark 10-year note since Oct. 3, according to Bloomberg data.

Gross domestic product rose 6.9 percent in the three months through September, the least in two years, official data show.

The cost of one-year interest-rate swaps, or derivative contracts used to guard against fluctuations in funding costs, rose six basis points to 7.82 percent, according to data compiled by Bloomberg.

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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