Indian Swaps Near Two-Month High as Inflation Seen Quickening

India’s interest-rate swaps are near a two-month high on speculation inflation in Asia’s third- largest economy quickened in October to the highest this year.

The benchmark wholesale-price index climbed 8 percent last month from a year earlier, according to the median of estimate of 14 economists in a Bloomberg News survey before data due Nov. 14. That would be the biggest increase since November 2011. Central bank Governor Duvvuri Subbarao kept borrowing costs unchanged in his last policy statement on Oct. 30, and signaled a reduction in local interest rates may be possible only after inflation eases next quarter.

“Swaps are pricing in the possibility of inflation remaining elevated for sometime,” said N.S. Venkatesh, treasurer at IDBI Bank Ltd. (IDBI) in Mumbai.“That will delay interest-rate cuts.”

The fixed payment to lock in one-year borrowing costs was at 7.78 percent as of 10:15 a.m. in Mumbai, according to data compiled by Bloomberg. The rate touched 7.79 percent yesterday, the highest level since Sept. 5.

The yield on the benchmark 8.15 percent government bonds due June 2022 fell one basis point, or 0.01 percentage point, to 8.18 percent.

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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