India Bonds Rally as Declining Oil Price Eases Inflation Concern

Indian government bonds rallied, pushing the 12-year yield to the lowest level in more than week, as falling oil prices eased concern inflation will accelerate.

Crude traded in New York declined for a fourth day to $97.06 a barrel after European election results stoked speculation austerity efforts will be derailed and weaker-than-expected U.S. jobs data underscored concern the recovery in the world’s largest economy may be losing momentum. Oil is now 8.6 percent cheaper than it was on May 1. India imports more than three-quarters of its fuel requirements.

“The oil-price decline is significant and therefore has had a bearing on bond yields,” said Debendra Kumar Dash, a fixed-income trader at Development Credit Bank Ltd. in Mumbai. “Yields may extend their slide this week.”

The yield on the 9.15 percent note due November 2024 declined five basis points, or 0.05 percentage point, to 8.64 percent as of 9:42 a.m. in Mumbai, according to the central bank’s trading system. That was the lowest level since April 25. It may reach 8.62 percent this week, Dash forecast.

Wholesale prices rose 6.89 percent in March from a year earlier, the same as in January which was the least since November 2009.

The cost of one-year interest-rate swaps, or derivative contracts used to guard against fluctuations in funding costs, fell four basis point to 8.03 percent, according to data compiled by Bloomberg.

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