India Swaps Complete Weekly Decline as Faster Inflation Forecast

India’s interest-rate swaps completed a third weekly drop as economists forecast a government report will show inflation accelerated to the fastest pace this year.

The benchmark wholesale-price index rose 7.9 percent last month from a year earlier, according to the median of estimate of 28 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 the repurchase rate unchanged for a fourth policy meeting on Oct. 30, and signaled a reduction is likely only after inflation eases next quarter.

“Swap rates are reflecting elevated inflation levels,” said Anoop Verma, a fixed-income trader at Development Credit Bank Ltd. (DEVB) in Mumbai. “The central bank has also more or less ruled out any rate cut this quarter.”

The fixed payment to lock in five-year borrowing costs rose seven basis points this week to 7.18 percent in Mumbai, according to data compiled by Bloomberg. The rate rose four basis points, or 0.04 percentage point, today to the highest level since since Sept. 19.

The yield on the benchmark 8.15 percent government bonds due June 2022 rose two basis points this week and today at 8.22 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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