India’s Bond Yield at Three-Week High Before RBI, Fed Meetings

India’s 10-year bond yield was steady at a three-week high before the central bank’s policy review today, at which most economists predict it will increase borrowing costs for a third straight meeting.

The Reserve Bank of India will raise its repurchase rate by 25 basis points to 8 percent, 26 of 31 economists surveyed by Bloomberg forecast, after inflation accelerated last month. The U.S. Federal Reserve will decide whether to maintain or cut its $85 billion monthly bond-buying program at the end of a two-day meeting today. Some 34 percent of economists surveyed by Bloomberg Dec. 6 predicted the Fed will start tapering the stimulus this month, up from 17 percent in a Nov. 8 poll.

The yield on India’s 8.83 percent government debt due November 2023 was little changed at 8.91 percent as of 9:43 a.m. in Mumbai, according to the central bank’s trading system. The rate closed yesterday at the highest level since Nov. 22.

“Markets are awaiting the outcome of the RBI policy review as well as the Fed’s decision on tapering,” Abhishek Goenka, chief executive officer at India Forex Advisors Pvt. in Mumbai, wrote in a research note today. “Data that showed inflation remained at elevated levels made an open and shut case for a key rate hike of 25 basis points by the RBI.”

Wholesale prices rose 7.52 percent in November from a year earlier, official data showed Dec. 16, the fastest pace since September 2012 and more than the 7 percent median forecast in a Bloomberg survey. Consumer prices climbed 11.24 percent, a report showed Dec. 12, the most in data compiled by Bloomberg going back to January 2012.

The RBI is “very uncomfortable” with the level of inflation, Governor Raghuram Rajan said Dec. 12. He has boosted borrowing costs by 25 basis points each at both the reviews he’s led since taking office Sept. 4.

The one-year interest-rate swap, a derivative contract used to guard against swings in funding costs, climbed two basis points to 8.59 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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