India’s Bond Yields Near Six-Week Low on RBI Debt Purchases

India’s 10-year bond yields were near a six-week low on optimism debt purchases by the central bank will spur demand for the securities.

The Reserve Bank of India purchased 116.03 billion rupees ($2.1 billion) of government notes due in 2017, 2020, 2022 and 2026 at an open-market auction today, according to a statement on its website. The RBI, which last lowered its repurchase rate by 50 basis points to 8 percent in April, will next review policy on Dec. 18.

“We expect the RBI to complete 1 trillion rupees of open- market purchases” in the second half of the fiscal year through March, Barclays Plc strategists Rohit Arora and Igor Arsenin wrote in a research note today. “We recommend 10-year bonds in anticipation of rate cuts starting next quarter.”

The yield on the 8.15 percent notes maturing in June 2022 was little changed at 8.18 percent in Mumbai, according to the central bank’s trading system. The rate touched 8.17 percent on Dec. 6, the lowest level since Oct. 29.

The RBI picked up 116.43 billion rupees of securities on Dec. 4 at its first debt-buying auction since June. Today’s purchases takes the total so far this fiscal year to 1.1 trillion rupees.

The one-year interest-rate swap, a derivative contract used to guard against fluctuations in funding costs, was little changed at 7.66 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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