India’s 10-year bonds gained for the first time in four days on speculation yields at the highest level in two years will attract investors.
Yields have risen 49 basis points since Jan. 1 amid concern the central bank will increase interest rates for the sixth time this year at its policy review on Nov. 2 to cool inflation. The wholesale price index rose 8.6 percent in September from a year earlier after gaining 8.5 percent in August.
“There was some softening of bond yields today as these are probably good levels to buy,” said Roy Paul, deputy general manager at Federal Bank Ltd. in Mumbai.
The yield on the 7.80 percent note due May 2020 fell one basis point to 8.08 percent as of the 5 p.m. close in Mumbai, according to the central bank’s trading system. The yield earlier touched 8.13 percent, the highest level since October 2008. The price rose 0.11, or 11 paise per 100 rupee face amount, to 98.18.
Inflation still remains “well above” the central bank’s “comfort zone,” Deputy Governor Subir Gokarn said Oct. 5 in Mumbai, prompting speculation of more monetary tightening.
The cost of one-year interest-rate swaps, a fixed payment made to receive floating rates, rose one basis point to 6.73 percent.