India’s 2024 Bond Yield Drops to Three-Week Low on Rate-Cut Bets

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The yield on Indian government bonds due 2024 slipped to a three-week low on speculation the central bank will add to two interest-rate cuts this year as inflation slows.

Reserve Bank of India Governor Raghuram Rajan will lower the benchmark repurchase rate by 25 basis points to 7.25 percent at a June 2 review, according to 24 of 31 economists surveyed by Bloomberg. One sees a cut to 7 percent while six predict no change. India has scope for further monetary easing, Chief Economic Adviser Arvind Subramanian said May 26. The rupee advanced Thursday, snapping a three-day decline.

“Bond markets are looking at another rate reduction by the central bank next week,” said Harish Agarwal, a fixed-income trader at FirstRand Ltd. in Mumbai.

The yield on the 8.4 percent sovereign notes due July 2024, the 10-year benchmark, fell two basis points, or 0.02 percentage point, to close at 7.85 percent, the lowest since May 5, in Mumbai, prices from the RBI’s trading system show. The yield on the 7.72 percent bonds maturing May 2025, the new 10-year security issued last week, declined two basis points to 7.65 percent.

Consumer prices rose 4.87 percent in April from a year earlier, the least in four months. Governor Rajan cut the repo rate in January and March.

The rupee rose 0.4 percent to 63.8075 a dollar, according to prices from local banks compiled by Bloomberg. The currency has declined 0.6 percent in May, heading for a third straight monthly loss.

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