India’s 10-year bonds completed a second weekly advance on speculation the central bank will ease monetary policy to arrest an economic slowdown.
Industrial output rose 2.4 percent in May from a year earlier, compared with an average gain of 5.1 percent in the previous two years, the Central Statistical Office said in a statement yesterday. The economy expanded 5.3 percent in the three months through March, the slowest pace in nine years.
“There is cyclical downward pressure on growth,” said J. Moses Harding, executive vice president at IndusInd Bank Ltd. in Mumbai. “It’s a matter of time before the central bank initiates some monetary-easing measures.”
The yield on the 8.15 percent notes due June 2022 declined six basis points, or 0.06 percentage point, this week to 8.10 percent in Mumbai, according to the central bank’s trading system. The rate was little changed today.
The Reserve Bank of India, which cut its repurchase rate last quarter for the first time since 2009, will review its policy on July 31. The monetary authority reduced its repurchase rate by 50 basis points to 8 percent in April, after raising it by a record 375 basis points through 2010 and 2011. Governor Duvvuri Subbarao held the repo rate at 8 percent at a meeting on June 18.
Lenders’ cash reserve requirements has been cut by 125 basis points this year to 4.75 percent.
The government sold 160 billion rupees ($2.9 billion) of notes due in 2017, 2022, 2030 and 2036 today.
One-year interest-rate swaps, or derivative contracts used to guard against fluctuations in funding costs, fell 12 basis points this week to 7.62 percent, according to data compiled by Bloomberg. They rose four basis points today.