Sept. 27 (Bloomberg) -- India’s 10-year bonds dropped for a second day after Reserve Bank of India Governor Duvvuri Subbarao said inflation has been “fairly stubborn” and remains above the central bank’s comfort level.
A rate of “4 to 6 percent is the short-term comfort range” for inflation, Subbarao said yesterday in remarks at New York University’s Stern School of Business. India’s benchmark wholesale-price inflation accelerated to a 13-month high of 9.78 percent in August. The central bank has boosted borrowing costs six times this year, lifting the repurchase rate to 8.25 percent.
“Inflation concern still persists,” said Krishnamurthy Harihar, treasurer at FirstRand Ltd. in Mumbai. “There still remains a strong possibility of another rate hike.”
The yield on the 7.8 percent securities due April 2021 rose one basis point to 8.32 percent at the 5 p.m. close in Mumbai, according to the central bank’s trading system. A basis point is 0.01 percentage point.
The cost of one-year interest-rate swaps, or derivative contracts used to guard against fluctuations in borrowing costs, rose 7 basis points to 7.82 percent, according to data compiled by Bloomberg.
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