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Indian Bonds Gain a Second Day on Speculation RBI Will Buy Debt

Nov. 27 (Bloomberg) -- India’s 10-year bonds gained for a second day, pushing the yield to an almost two-week low, on speculation the central bank will resume open-market debt purchases to help ease a cash squeeze.

Local lenders borrowed an average 926 billion rupees ($17 billion) a day from the central bank so far this month to meet shortages, compared with 671 billion rupees in October, official data show. The Reserve Bank of India, which has bought 820 billion rupees of debt since April 1 to boost the availability of funds, last held an auction to purchase securities in June.

“Bonds have advanced due to expectations of purchases by the RBI,” said Rajeev Radhakrishnan, a fund manager in Mumbai SBI Funds Management Pvt. “Liquidity is tight and the pressure could be aggravated by tax payments by companies next month.”

The yield on the 8.15 percent government notes due June 2022 fell two basis points, or 0.02 percentage points, to 8.19 percent in Mumbai, according to the central bank’s trading system.

RBI Deputy Governor H.R. Khan said today that the central bank will take action if the cash shortage persisted.

The one-year interest-rate swap, a derivative contract used to guard against fluctuations in funding costs, fell two basis points to 7.75 percent, data compiled by Bloomberg show.

To contact the reporter on this story: V. Ramakrishnan in Mumbai at

To contact the editor responsible for this story: James Regan at

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