Indian Bonds Advance Most in a Month as Monsoon Rains Progress

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Indian sovereign bonds due in 2024 climbed, driving the yield down by the most in nearly a month, as progress in monsoon rains eased concern over inflation.

Seasonal showers have been 13 percent above average since June 1, the weather bureau said on its website. It has forecast the June-September monsoon rainfall to be 88 percent of a 50-year average this year. The yield on the 2024 notes jumped 29 basis points in the last two weeks on speculation deficient rains will hurt crop output and stoke food costs. Consumer prices rose 5.01 percent in May from a year earlier, after a 4.87 percent increase in April, official data showed on Friday.

The yield on the securities due July 2024, the current 10-year benchmark, fell four basis points, the most since May 18, to 8.07 percent in Mumbai, prices from the Reserve Bank of India’s trading system show. The rupee weakened for a third day, dropping 0.2 percent to 64.1675 per dollar.

“The monsoon’s progress has definitely helped improve sentiment,” said Vijay Sharma, executive vice president for fixed income at PNB Gilts Ltd. in New Delhi. “Inflation has quickened, but food costs have remained in control.”

Food prices, which account for almost 50 percent of India’s CPI basket, increased 4.8 percent in May from a year earlier, Friday’s data showed. They rose 5.11 percent in April. About 77 percent of India has received excess or normal rain since June 1, the state weather department said. More than half of the nation’s farmland depends on the monsoon for water.

The yield on the sovereign bonds due May 2025, the new 10-year debt issued last month, dropped two basis points to 7.86 percent on Monday. It climbed 25 basis points in the last two weeks.

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