India’s bonds rose for a third day, pushing yields to this month’s lowest level, on speculation the central bank will cut borrowing costs as the economy cools.
The Reserve Bank of India, which has held the repurchase rate at 8.5 percent since October after last year’s seven increases, will review monetary policy on April 17. Government data may show this week that annual gains in factory output slowed to 6.6 percent in February from 6.8 percent the previous month, according to a Bloomberg survey of economists. Bonds also gained on optimism the central bank will buy debt to support a record sovereign borrowing program.
“A token rate cut is probably on the cards given growth concerns,” said Paresh Nayar, head of money-market and currency trading in Mumbai at FirstRand Ltd. “There could also be an open-market operation to buy bonds after the lukewarm response to last week’s auction.”
The yield on the 8.79 percent bonds due November 2021 fell three basis points, or 0.03 percentage point, to 8.59 percent in Mumbai, according to the central bank’s trading system. That is the lowest level since March 30.
Primary dealers, who underwrite federal debt sales, had to pick up 6.6 percent of the 180 billion rupees ($3.5 billion) of bonds offered at an auction on April 3, according to the central bank. India aims to sell 150 billion rupees of bonds on April 13 as part of a plan to borrow 5.69 trillion rupees in the fiscal year that started April 1.
The Reserve Bank bought 1.3 trillion rupees of securities via open-market auctions in the year ended March 31.
One-year interest-rate swaps, or derivative contracts used to guard against fluctuations in funding costs, fell two basis points to 7.96 percent, data compiled by Bloomberg show.