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India’s 2022 Bond Yield Holds Near One-Week Low on Rupee Rebound

July 1 (Bloomberg) -- Indian bond yields held near the lowest level in a week as a rebound in the rupee tempered concern inflation will accelerate.

The rupee has climbed 2 percent from an all-time low of 60.765 per dollar reached on June 26. A weaker local currency boosts the cost of imported goods, fueling consumer-price increases. International investors pulled more than $5 billion from local debt in June, exchange data show, as the rupee lost 4.9 percent in the biggest monthly decline since May 2012.

“The currency’s rebound has definitely helped the sentiment,” said N.S. Venkatesh, the Mumbai-based head of treasury at state-run IDBI Bank Ltd.

The yield on 8.15 percent notes due June 2022 was little changed at 7.64 percent in Mumbai, according to the central bank’s trading system. The rate was at 7.63 percent on June 28, the lowest in a week, having climbed 18 basis points last month, the most since the securities were issued in June 2012.

The rupee fell 8.6 percent last quarter, the most since 2011, as U.S. policy makers signaled they may rein in stimulus measures, which have boosted dollar supply, should the U.S. economy perform in line with central bank estimates.

Reserve Bank of India Governor Duvvuri Subbarao kept the repurchase rate steady at 7.25 percent on June 17, citing inflation risks, even after wholesale prices rose the least since 2009 in May. India’s monetary-policy stance will be determined by the evolution of economic growth, inflation and the balance of payments in the months ahead, the central bank said in its statement on the same day.

The one-year interest-rate swap, a derivative contract used to guard against fluctuations in funding costs, jumped five basis points to 7.54 percent, data compiled by Bloomberg show.

To contact the reporter on this story: Shikhar Balwani in Mumbai at sbalwani@bloomberg.net

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

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