India’s 10-Year Bond Yield Near One-Week High on Rate Outlook

India’s 10-year government bond yield was near a one-week high as economists predicted the central bank will increase borrowing costs for the second time in as many months next week.

Reserve Bank of India Governor Raghuram Rajan will raise the benchmark repurchase rate 25 basis points to 7.75 percent on Oct. 29, according to the median estimate in a Bloomberg survey. Rajan has said containing inflation is the central bank’s top priority. Wholesale prices rose 6.46 percent in September, the most in seven months, while consumer-price gains quickened to 9.84 percent, official data showed Oct. 14.

The yield on the 7.16 percent notes due May 2023 was 8.62 percent as of 10:02 a.m. in Mumbai, compared with yesterday’s 8.63 percent that was the highest since Oct. 15, according to prices from the central bank’s trading system.

“Markets have factored in a 25 basis point increase in the repo rate,” Harish Agarwal, a fixed-income trade at FirstRand Ltd. in Mumbai, said by phone. “Trading will be range-bound as there are no major events before the policy.”

Increased price pressures will prompt the RBI to raise the benchmark rate by 50 basis points on Oct. 29, Taimur Baig, Singapore-based director of Asia economics at Deutsche Bank AG, wrote in an Oct. 16 report. Goldman Sachs Group Inc. sees the benchmark rising to 8.5 percent by March.

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