India’s 10-year government bond yields held near the lowest level in more than a week on speculation easing tensions in Ukraine will spur demand for riskier assets.
Russian President Vladimir Putin said yesterday he sees no immediate need to invade Ukraine, spurring a rally in global stocks and sending the Bloomberg USD Emerging Market Sovereign Bond Index (BEMS) to a nine-month high. Russian troops remain in the Ukraine’s Crimea region after Moscow ramped up its military presence following the ouster of President Viktor Yanukovych.
The yield on the 8.83 percent sovereign notes due November 2023 was at 8.84 percent in Mumbai, little changed from yesterday’s lowest since Feb. 21, according to the central bank’s trading system. Yesterday’s seven basis points drop was the steepest since Jan. 20.
“Stability has returned to rupee-denominated government bonds,” DBS Bank Ltd. economists, including Singapore-based Radhika Rao, wrote in a research note today. “With policy rates forecast to stay flat through the end of this year, we believe that the yields on two-year and 10-year government bonds are likely to remain rangebound between 8.5 percent and 9 percent.”
Reserve Bank of India Governor Raghuram Rajan, who has raised borrowing costs three times since taking office in September, said on Feb. 23 that inflation remains the biggest threat to the Indian economy and any further action will depend on data. Wholesale prices climbed 5.05 percent in January from a year earlier, the least since May, and the consumer-price index jumped 8.79 percent, the smallest gain in two years.
India’s government may borrow as much as 60 percent of its 5.97-trillion rupee ($96.8 billion) estimate for the fiscal year ending March 2015 in the first six months, said two Finance Ministry officials with direct knowledge of the matter, asking not to be identified as the information isn’t public. The government sold 140 billion rupees of treasury bills as planned at an auction today, the RBI said in a statement.
One-year interest-rate swaps, derivative contracts used to guard against swings in funding costs, rose one basis point to 8.68 percent, data compiled by Bloomberg show.
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