Indian Bonds Complete First Weekly Gain in a Month Before Budget

India’s 10-year bonds completed their first weekly gain in a month on signs Prime Minister Narendra Modi’s new government will boost efforts to curb the fiscal deficit in next week’s budget.

India can’t afford populist policies and needs fiscal discipline for sustainable economic growth, Finance Minister Arun Jaitley said this week. State-run refiners raised fuel prices this week following an increase in rail fares last month, adding to speculation the administration will outline more plans to boost revenue and cut oil subsidies on July 10.

The yield on the 8.83 percent bonds due November 2023 fell nine basis points, or 0.09 percentage point, this week to 8.66 percent in Mumbai, according to the central bank’s trading system. That’s the first decline since the period ended June 6. The rate was little changed today.

“Markets are hinging a lot of hopes on the budget and we expect the government’s focus to be on fiscal consolidation, which is positive for bonds,” said Sujoy Kumar Das, head of fixed income at Religare Invesco Asset Management Co. in Mumbai. “Some small progress in the monsoon has also aided sentiment.”

Conditions are favorable for the June-September seasonal monsoon to advance further over the next three days, the weather bureau said yesterday, easing concern inadequate rainfall will hurt farm output and spur inflation. Rain in June was the lowest since 2009.

One-year interest-rate swaps, derivative contracts used to guard against swings in funding costs, dropped four basis points this week and were unchanged today at 8.34 percent, data compiled by Bloomberg show.

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 Andrew Janes, Sam Nagarajan

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