India Bonds Rise for Third Day Before RBI’s Open-Market Purchase

India’s 10-year government bonds advanced for a third day before the central bank’s purchase of long-dated sovereign notes tomorrow.

The Reserve Bank of India will offer to buy as much as 80 billion rupees ($1.2 billion) of debt through an open-market auction. The central bank announced the purchase on Aug. 20 after cash-supply curbs to support the rupee pushed 10-year bond yields to a 12-year high. The rupee sank to a record low of 65.56 per dollar today.

“Investors are taking a wait and watch approach,” said N.S. Venkatesh, head of treasury at IDBI Bank Ltd. (IDBI) in Mumbai. “Markets will take cues from the RBI’s open-market purchase tomorrow.”

The yield on the 7.16 percent government bonds due May 2023 declined 18 basis points, or 0.18 percentage point, to 8.24 percent in Mumbai, according to prices from the central bank’s trading system.

The one-year interest-rate swap, a derivative contract used to guard against fluctuations in funding costs, dropped 4 basis points to 9.61 percent, according to data compiled by Bloomberg.

To contact the reporters on this story: Shikhar Balwani in Mumbai at sbalwani@bloomberg.net; Divya Patil in Mumbai at dpatil7@bloomberg.net

To contact the editor responsible for this story: Amit Prakash at aprakash1@bloomberg.net

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