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India’s Government Bonds Gain a Fifth Day on Rate-Cut Forecasts

India’s 10-year bonds rose for a fifth day, the longest winning streak since December, on optimism the central bank will lower interest rates next week to support economic growth.

Eleven of sixteen economists in a Bloomberg News survey predict the repurchase rate will be cut 25 basis points to 8.25 percent at the Reserve Bank of India’s policy review on April 17. Three forecast no change while two see a reduction of 50 basis points. Indian manufacturing grew at the slowest pace in three months in March, a private report showed on April 2. The Purchasing Managers’ Index fell to 54.7 from 56.6 in February, according to HSBC Holdings Plc and Markit Economics.

“A cut in rates is absolutely certain now,” said R.S. Chauhan, Mumbai-based chief dealer of currencies and bonds at State Bank of Bikaner & Jaipur. (SBBJ) “Growth is increasingly becoming a concern.”

The yield on the 8.79 percent bonds due November 2021 fell two basis points, or 0.02 percentage point, to 8.53 percent as of 9:44 a.m. in Mumbai, according to the central bank’s trading system. That is the lowest level since March 27.

Official data may show today annual gains in factory output slowed to 6.7 percent in February from 6.8 percent the previous month, according to a Bloomberg survey of economists. The Reserve Bank of India boosted the repurchase rate 13 times between March 2010 and October 2011.

One-year interest-rate swaps, or derivative contracts used to guard against fluctuations in funding costs, rose one basis point to 8 percent, data compiled by Bloomberg show.

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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