India 2024 Bond Yields Near Four-Week Low on RBI Rate Cut Bets

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The yield on Indian government bonds due 2024 held near a four-week low on signs the central bank will cut interest rates for the third time this year on Tuesday.

Thirty-three of 41 analysts surveyed by Bloomberg forecast the Reserve Bank of India will lower its key repurchase rate by 25 basis points to 7.25 percent, with one seeing a reduction to 7 percent and the remainder predicting no change. Economic growth in the 12 months ended March 31 came in slightly below estimates at 7.3 percent on Friday, while consumer-price gains eased to a four-month low of 4.87 percent in April. The rupee strengthened on Monday.

“With CPI inflation coming in line with the RBI’s projections but activity surprising on the downside, we think that the probability has moved toward a rate cut,” Goohoon Kwon, an economist at Goldman Sachs Group Inc. in Hong Kong, wrote in a research note released May 30.

The yield on the 8.4 percent notes due July 2024 was little changed from Friday’s close of 7.82 percent in Mumbai, which was the lowest since April 29, prices from the RBI’s trading system show. That on the debt due May 2025, the new 10-year benchmark, was steady at 7.64 percent.

The central bank will ease on Tuesday and “there is scope for another rate cut” before December, said Anand Bagri, senior vice president and head of domestic treasury markets at RBL Bank Ltd. in Mumbai.

After the last rate review in April, RBI Governor Raghuram Rajan said he will consider factors including the likely strength of monsoons before deciding on future action. Weather agencies in the U.S., Japan and Australia have declared the onset of an El Nino weather pattern, which brings drier weather to Asia and pushes up food prices.

In the currency market, the rupee strengthened 0.2 percent to 63.71 a dollar, according to prices from local banks compiled by Bloomberg.

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