India’s 2023 Bonds Snap Two-Day Decline on Foreign Fund Optimism

Indian government bonds due 2023 rose for the first time in three days on optimism an auction of debt-purchase limits to foreign investors today will spur inflows into local securities.

India plans to offer 71.52 billion rupees ($1.2 billion) of government debt quota to overseas funds, the National Stock Exchange of India Ltd. said in a statement yesterday. Global funds have boosted holdings of Indian company and sovereign notes by $5.5 billion since the end of April. Recent strong inflows suggest bidding interest at the auction later today will likely be strong, according to Standard Chartered Plc.

The yield on the 8.83 percent notes due November 2023 fell three basis points, or 0.03 percentage point, to 8.54 percent in Mumbai, prices from the central bank’s trading system show. It climbed five basis points over the past two days.

“The debt-quota auction should be received well by overseas investors as inflows show they are bullish on India,” Sagar Shah, deputy vice-president for treasury at RBL Bank in Mumbai, said by phone. “Buyers were active today after two straight days of declines” in bonds.

Ten-year notes rallied last week, with the yield slumping 13 basis points to 8.51 percent, after the central bank said it could ease policy should inflation slow more than anticipated. India will issue data on consumer prices for May tomorrow and wholesale-price inflation figures on June 16.

Reserve Bank of India Governor Raghuram Rajan, who has raised the benchmark repurchase rate by 75 basis points since taking charge in September, left it unchanged at 8 percent for a second straight meeting on June 3. The RBI aims to curb consumer-price gains, which were 8.59 percent in April, to 8 percent by January 2015 and 6 percent a year later.

One-year interest-rate swaps, derivative contracts used to guard against swings in funding costs, rose one basis point to 8.25 percent, data compiled by Bloomberg show. The contracts slumped 22 basis points last week to the lowest level since July 2013.

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

To contact the editors responsible for this story: James Regan at jregan19@bloomberg.net Thomas Kutty Abraham

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