India’s Bond Yields at This Week’s High on Inflation Concern

India’s 10-year bonds were little changed, holding yields at this week’s highest level, on concern an accelerated slide in the rupee will boost the cost of imports and spur inflation.

The rupee slid 8.3 percent this quarter, the biggest drop among Asian currencies, and touched a record low of 54.3050 per dollar today. The benchmark wholesale-price index rose 9.11 percent in November from a year earlier, government data showed yesterday. The Reserve Bank of India will keep the repurchase rate unchanged at 8.50 percent at a policy review tomorrow, according to all 14 economists in a Bloomberg survey.

“The central bank can’t afford to ease its policy stance as inflation continues to be a worry,” said N.S. Venkatesh, head of treasury at Mumbai-based IDBI Bank Ltd. “The rupee’s drop will also push prices higher.”

The yield on the 8.79 percent bonds due November 2021 was little changed at 8.49 percent in Mumbai, according to the central bank’s trading system. The rate jumped six basis points, or 0.06 percentage point, yesterday, the biggest increase in six weeks.

The Reserve Bank has boosted borrowing costs 13 times since the start of 2010 to cool inflation and last lifted the repo rate by 25 basis points on Oct. 25.

The cost of one-year interest-rate swaps, or derivative contracts used to guard against fluctuations in funding costs, climbed two basis points to 7.82 percent, according to data compiled by Bloomberg.

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