India’s 10-year bonds dropped for a fifth day as investors awaited U.S. data that may help gauge when the Federal Reserve will cut monetary stimulus that has buoyed emerging-market assets.
U.S. jobs and new home sales reports today may provide clues as to when the Fed will taper its $85 billion of monthly debt purchases. Global funds have pared holdings of Indian debt by more than $14 billion since mid-May amid the prospect of tapering. The Indian currency’s 1.5 percent loss against the dollar in November has raised concern about inflation, according to Dhanlaxmi Bank Ltd., as the nation imports about 80 percent of its oil.
“Inflation is likely to stay high for some time and the rupee’s movement isn’t lending any comfort to the bond markets,” said Srinivasa Raghavan, Mumbai-based executive vice-president of treasury at Dhanlaxmi Bank. “The Fed tapering issue continues to be an overhang.”
The yield on the 8.83 percent bonds due November 2023 rose one basis point, or 0.01 percentage point, to 8.78 percent in Mumbai, prices from the central bank’s trading system show. The rate has risen nine basis points since Nov. 27. The rupee rose 0.5 percent today.
The Federal Open Market Committee meets Dec. 17-18 to discuss policy after minutes of their last meeting in October showed officials may reduce stimulus should the U.S. economy improve as anticipated.
India’s economy grew a faster-than-estimated 4.8 percent in the third quarter from a year earlier, compared with 4.4 percent in the previous period, a report showed last week. Wholesale prices rose 7 percent year-on-year in October, the fastest pace since February, a separate report showed.
The RBI will study data, including food prices and exchange-rate depreciation, before deciding whether to increase benchmark borrowing costs for a third straight meeting, Governor Raghuram Rajan said Nov. 13. He raised the repurchase rate by 25 basis points each in September and October, taking it to 7.75 percent. The next review is due Dec. 18, two days after the government releases wholesale-price inflation figures for November.
The one-year interest-rate swap, a derivative contract used to guard against fluctuations in funding costs, was unchanged at 8.42 percent, data compiled by Bloomberg show.