India’s bonds gained on speculation the slowest economic growth in a decade will prompt the central bank to cut borrowing costs for the second time this year.
The Reserve Bank of India will lower the repurchase rate by 25 basis points, or 0.25 percentage point, to 7.5 percent today, according to 30 of 35 economists in a Bloomberg News survey. Five expect no change. The rate was cut by 25 basis points in January, the first reduction in nine months.
“Investors have mostly factored in a reduction in rates today as growth is a big concern,” said R.S. Chauhan, Mumbai-based chief dealer of fixed-income and currencies at State Bank of Bikaner & Jaipur. “Yields are unlikely to fall much in case the rate is cut by 25 basis points.”
The yield on the 8.15 percent notes due June 2022 fell one basis point to 7.88 percent as of 9:22 a.m. in Mumbai, according to the central bank’s trading system.
Asia’s third-largest economy will expand 5 percent in the fiscal year ending March 31, compared with 6.2 percent in the prior 12 months, the Central Statistical Office said last month. That would be the slowest pace since 2003.
India plans to raise 3.49 trillion rupees ($65 billion) from debt sales in the six months ending Sept. 30, Economic Affairs Secretary Arvind Mayaram said yesterday. The target for the full fiscal year is 5.79 trillion rupees.
“The first half borrowing plan is in line with market expectations,” said Chauhan.
The one-year interest-rate swap, a derivative contract used to guard against fluctuations in funding costs, rose one basis point to 7.51 percent, according to data compiled by Bloomberg.