India’s Bond Yields Near Two-Month Low on Bets RBI May Buy Debt

India’s 10-year bonds advanced, sending yields toward a two-month low, on speculation the central bank will step up debt purchases to help counter an economic slowdown.

The Reserve Bank of India has bought 820 billion rupees ($15.5 billion) of government notes in the fiscal year that began April 1, compared with 41 billion rupees in the same period a year earlier, central bank data show. The monetary authority may buy as much as 1.2 trillion rupees of sovereign securities in the next six months to offset tightness in cash conditions, according to Barclays Plc.

“Demand for bonds from the central bank and market participants in the second half will be greater than combined supply,” Barclays analysts including Kumar Rachapudi wrote in a research note yesterday. “This will trigger a rally in bonds in the coming months.”

The yield on the notes maturing June 2022 fell one basis point, or 0.01 percentage point, to 8.15 percent as of 9:32 a.m. in Mumbai, according to the central bank’s trading system. The rate touched 8.14 percent on Oct. 9, the lowest level since Aug. 9.

Barclays predicts the 10-year bond yield will drop to 7.75 percent by Dec. 31 and 7.5 percent by the end of March.

India’s economy grew 5.5 percent in the three months ended June, government data show. Growth was 5.3 percent in the previous quarter, the least since 2009.

The fixed payment to lock in one-year borrowing costs was little changed at 7.62 percent in Mumbai, 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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