India 10-Year Bond Yield at One-Week Low on Lack of Supply

India’s 10-year bonds rose, pushing the yield to a one-week low, on speculation a lack of sales reduces concern there will be too much supply.

The government won’t sell any debt this week, the issuance calendar on the Reserve Bank of India website shows, which is positive for bonds as it eases worries about oversupply, said Debendra Kumar Dash, a Mumbai-based fixed-income trader at Development Credit Bank Ltd. (DEVB) RBI Governor Raghuram Rajan, who boosted the key repurchase rate by 25 basis points to 7.5 percent last month in the first increase since 2011, will review borrowing costs on Oct. 29.

The yield on the 7.16 percent government bonds due May 2023 fell one basis point, or 0.01 percentage point, to 8.55 percent as of 10:29 a.m. in Mumbai, according to prices from the central bank’s trading system. That was the lowest level since Oct. 11.

“Markets are likely to trade range-bound till the central bank policy next week,” said Srinivasa Raghavan, Mumbai-based executive vice-president of treasury at Dhanlaxmi Bank Ltd. (DHLBK) “Everyone is looking for cues from the RBI.”

Ten-year notes fell in each of the last four months, the longest run of losses since 2009, as the RBI raised interest rates and curbed funding support to banks to stem a slide in the rupee. The currency has rebounded to 61.545 per dollar from a record low of 68.845 on Aug. 28, allowing the central bank to scale back some of the measures. Rajan twice cut two rates at which the RBI supplies cash to lenders in the past month.

The one-year interest-rate swap, a derivative contract used to guard against fluctuations in funding costs, was unchanged at 8.43 percent, data compiled by Bloomberg show.

To contact the reporter on this story: Shikhar Balwani in Mumbai at sbalwani@bloomberg.net

To contact the editor responsible for this story: James Regan at jregan19@bloomberg.net

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