India Bond Yields Near This Week’s Low on Rate-Cut Speculation

Indian government bond yields were near this week’s lowest level on speculation the central bank will reduce borrowing costs to help boost a slowing economy.

The Reserve Bank of India will lower the benchmark repurchase rate by 25 basis points to 7.75 percent, according to 19 of 25 economists in a Bloomberg News survey before a policy review on June 18. Four predicted the central bank will leave the rate unchanged and two forecast a 50 basis point cut. Factory output rose 0.1 percent in April from a year earlier after a revised 3.2 percent drop in March, official data showed earlier this week.

“Slowing growth appears to be a bigger worry for the government than stubborn inflation,” DBS Bank Ltd. said in a note. “A 25 basis point cut in the repurchase rate seems likely.”

The yield on the government’s 8.15 percent bonds due June 2022 was little changed at 8.05 percent in Mumbai, according to the central bank’s trading system. The rate touched 8.04 percent on June 13, the lowest level this week.

The benchmark wholesale-price index rose 7.55 percent in May from a year earlier, after climbing 7.23 percent in April, the commerce ministry said yesterday. That was more than the 7.5 percent median estimate in a Bloomberg News survey.

One-year interest-rate swaps, or derivative contracts used to guard against fluctuations in funding costs, rose four basis points to 7.58 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