Indian Bonds Gain a 3rd Day on Speculation RBI Will Ease Policy

India’s bonds gained a third day on speculation slowing economic growth will prompt the central bank to reduce interest rates.

Official figures due on Aug. 31 will probably show the economy grew 5.3 percent last quarter, matching the preceding period’s slowest pace since 2009, according to a Bloomberg survey of economists. Bonds also gained as a revival in monsoon rains and lower oil prices tempered speculation inflation will accelerate, according to Debendra Kumar Dash, a fixed-income trader in Mumbai at Development Credit Bank.

“Given the weak growth, monetary easing has to take place sometime in future,” said Dash. “Any reduction in price pressures would also be a positive for bonds.”

The yield on the 8.15 percent notes due June 2022 fell one basis point, or 0.01 percentage point, to 8.18 percent in Mumbai, according to the central bank’s trading system. That is the lowest level since Aug. 10.

The Reserve Bank of India kept the repurchase rate unchanged at 8 percent at a policy meeting July 31 and the next review is scheduled on Sept. 17. The rate was last cut by 50 basis points in April. Gross domestic product may rise 6.7 percent in the year that began April 1, less than the 7.6 percent gain forecast in February, Prime Minister Manmohan Singh’s economic panel said in a report this month.

The seasonal deficit in monsoon rains has dropped to 13 percent of a 50-year average from 19 percent at the end of July, the weather bureau said on its website yesterday.

The wholesale price index rose 6.87 percent in July, the slowest pace in 32 months, commerce ministry data show. Brent crude has fallen 0.9 percent this week to $112.59 a barrel, according to data compiled by Bloomberg.

One-year interest-rate swaps, or derivative contracts used to guard against fluctuations in funding costs, fell two basis points to 7.79 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: James Regan at jregan19@bloomberg.net

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