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India Bond Yields Decline to One-Month Low as RBI Purchases Debt

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Dec. 4 (Bloomberg) -- India’s 10-year bonds gained for a third day, pushing their yield to the lowest level in more than a month, on optimism debt purchases by the central bank will boost demand for the securities.

The Reserve Bank of India bought 116.43 billion rupees ($2.2 billion) of notes due in 2020, 2022 and 2027 at an open-market auction today, according to a central bank statement. The RBI may buy as much as 1 trillion rupees of fixed-income securities during the rest of the fiscal year that ends March 31, Barclays Plc estimates.

“We remain bullish on Indian government bonds and recommend an overweight duration stance from a portfolio perspective,” Barclays analysts including Singapore-based Rohit Arora said in a research note today.

The yield on the 8.15 percent notes due June 2022 declined to 8.171 percent in Mumbai from 8.174 percent yesterday, according to the central bank’s trading system. That is the lowest level since Oct. 29.

The central bank, which last held a debt-purchase auction in June, picked up 820 billion rupees of securities in the first quarter of this fiscal year to boost the availability of funds in the financial system.

The one-year interest-rate swap, a derivative contract used to guard against fluctuations in funding costs, was little changed at 7.73 percent today, data compiled by Bloomberg show.

To contact the reporter on this story: V. Ramakrishnan in Mumbai at rvenkatarama@bloomberg.net

To contact the editor responsible for this story: James Regan at jregan19@bloomberg.net

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