Indian 10-Year Yield at Three-Month Low on Easing Speculation

The yield on India’s 10-year government bonds held at the lowest level in almost three months on speculation monetary policy will be eased next week.

The Reserve Bank of India will reduce the cash reserve ratio by 25 basis points to 4.25 percent on Oct. 30, according to 11 of 18 economists surveyed by Bloomberg News. One predicted a 50 basis point cut, while the rest see no change. The RBI has held its benchmark repurchase rate at 8 percent since April. Six of the analysts surveyed are forecasting a 25 basis point cut on Oct. 30, two expect a 50 basis point reduction, while the remaining 10 predict no change.

“Yields are edging down as some loosening of monetary policy is expected,” said Paresh Nayar, head of money-market and currency trading at FirstRand Ltd. in Mumbai. “That could either be a cash reserves-ratio cut or a repo-rate reduction.”

The yield on the benchmark 8.15 percent notes due June 2022 held at 8.13 percent in Mumbai, according to the central bank’s trading system. The rate is the lowest since July 27.

The one-year interest-rate swap, derivative contracts used to guard against fluctuations in funding costs, dropped one basis point, or 0.01 percentage point, to 7.59 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: James Regan at jregan19@bloomberg.net

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