India’s 10-year sovereign bonds advanced as a jump in the yield to a three-month high lured investors.
The yield on notes due May 2025 fell two basis points on Wednesday, the most since Dec. 3, to 7.78 percent in Mumbai, according to prices from the Reserve Bank of India’s trading system. It climbed four basis points on Tuesday to 7.80 percent, the highest close since Sept. 7, amid a drop in global holdings of local bonds ahead of a potential increase in U.S. interest rates.
“The recent advance in yields offered a bargain-buying opportunity for some investors,” said Vijay Sharma, executive vice president for fixed income at PNB Gilts Ltd. in New Delhi. The Fed meeting remains a “key” event, he said.
Futures contracts show an 80 percent chance the Federal Reserve will raise borrowing costs at its Dec. 15-16 meeting. Foreign holdings of Indian sovereign and corporate notes have fallen 13.6 billion rupees ($203 million) in December, National Securities Depository Ltd. data show. They declined 46.9 billion rupees last month, the most since May, contributing to a 15-basis point increase in the 10-year yield that was the biggest since June.
Investor sentiment has been damped also as Prime Minister Narendra Modi struggles to push through economic reforms.
The rupee was steady at 66.84 a dollar on Wednesday, halting a five-day run of declines that was the longest since August, according to prices from local banks compiled by Bloomberg. The currency fell 2.1 percent last month in Asia’s worst performance.