India 2024 Bonds Gain Most in a Month as High Yields Draw Buyers

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Indian sovereign bonds due in 2024 advanced the most in a month as a recent rise in yields attracted buyers amid speculation concern over monsoon rains may be overdone.

Seasonal showers have been 11 percent above normal since June 1 and nearly 77 percent of the country has received normal or excess rain, according to the weather bureau. The monsoons irrigate more than half of India’s farmland and a shortfall can increase food prices, which account for almost 50 percent of the consumer price index. The weather office estimates that the June-September seasonal rainfall will be 88 percent of a 50-year average this year.

The yield on notes due July 2024, the current 10-year benchmark, fell five basis points to 8.03 percent in Mumbai, according to the Reserve Bank of India’s trading system. That’s the biggest fall since May 18.

The bonds have resisted three interest-rate cuts this year on concern over rain, rising oil prices and a global debt sell-off. The yield rose after the latest round of easing on June 2 and reached a six-month high of 8.11 percent on June 12.

“The monsoons may not be as much of a spoiler as people had earlier expected,” said Anand Bagri, senior vice president and head of domestic treasury at RBL Bank Ltd. in Mumbai. “Bonds may rally if the Federal Reserve decides to delay a decision on increasing interest rates today.”

Investors are awaiting the outcome of a two-day Fed policy meeting that ends Wednesday for signals on the timing of an increase in U.S. borrowing costs. Higher rates will reduce the allure of emerging-market assets.

The yield on Indian government bonds due May 2025, which were issued last month, dropped four basis points to 7.85 percent on Wednesday.

The rupee advanced for the first time in five days, gaining 0.2 percent to 64.1175 a dollar, according to prices from local banks compiled by Bloomberg.

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