India’s 10-year bonds dropped for the first time in five days on speculation yields at a 30-month low will deter buyers.
Yields fell the most in five months yesterday after government data showed the benchmark wholesale-price index rose 7.18 percent in December from a year earlier, the least since 2009. The median of 34 estimates in a Bloomberg News survey was for a 7.37 percent gain. Reserve Bank of India Governor Duvvuri Subbarao, who last lowered the repurchase rate by 50 basis points to 8 percent in April, will review monetary policy on Jan. 29.
“There was probably some profit booking as bonds had rallied too much too fast,” said R.S. Chauhan, Mumbai-based chief dealer of fixed-income and currencies at State Bank of Bikaner & Jaipur. “A 25 basis point cut in repo rate anyway looks certain now as the inflation data is positive.”
The yield on the 8.15 percent bonds due June 2022 rose three basis points, or 0.03 percentage point, to 7.83 percent in Mumbai, according to the central bank’s trading system. It fell seven basis points, or 0.07 percentage point, yesterday in the biggest decline since August.
Standard Chartered Plc predicts the RBI will cut its benchmark rate by 100 basis points in 2013. Investors should buy 10-year bonds with a yield target of 7.50 percent, the bank recommends.
The one-year interest-rate swap, a derivative contract used to guard against fluctuations in funding costs, rose one basis point to 7.50 percent, data compiled by Bloomberg show.