India’s Bonds Headed for a Monthly Advance as Slowdown Predicted

India’s 10-year bonds headed for a monthly advance on speculation data due tomorrow will show the economy slowed for a fifth straight quarter, adding pressure on the central bank to ease monetary policy.

Asia’s third-largest economy probably expanded 5.2 percent in the three months through June, according to the median estimate of 39 economists in Bloomberg News survey. That would be the slowest pace since 2009. The Reserve Bank of India, which cut the repurchase rate by 50 basis points to 8 percent in April and left it unchanged last month, will next review policy on Sept. 17.

“Gross domestic product growth below 5 percent would likely strengthen market expectations of a rate cut at the RBI’s September policy meeting,” analysts at Standard Chartered Plc, including Mumbai-based Anubhuti Sahay, wrote in a research note today. “A print below 5 percent would likely soften both the 10-year bond yield and short-end overnight index swap rates by about 10 basis points.”

The yield on the 8.15 percent notes due June 2022 has fallen six basis points, or 0.06 percentage point, this month to 8.19 percent in Mumbai, according to the central bank’s trading system. The rate rose one basis point today. The yield on benchmark 10 year notes dropped 38 basis points this year.

One-year interest-rate swaps, or derivative contracts used to guard against fluctuations in funding costs, rose four basis points this month to 7.77 percent, according to data compiled by Bloomberg. They fell one basis point today today.

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

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.