New Central Banker Spurs First India Bond Decline in Three Weeks

  • Rate cut hopes diminished after Patel’s appointment: Edelweiss
  • Rupee ends week little changed after two weeks of decline

India’s 10-year sovereign notes completed their first weekly drop in three weeks as Urjit Patel’s appointment as the next central bank chief dashed speculation that monetary policy will be eased aggressively.

Bonds had rallied since June after Reserve Bank of Governor Raghuram Rajan’s announcement that he will step down when his term ends in early September sparked speculation his successor will be more willing to lower policy rates. Patel’s elevation from deputy governor disappointed some investors because he had burnished his inflation-fighting credentials by advocating consumer-price targeting and the formation of an independent monetary policy panel.

“There is a bit of disappointment in the bond market after the government named Patel to head the central bank,” said Bhupesh Bameta, head of research for currencies and rates at Edelweiss Financial Services Ltd. in Mumbai.

The yield on the 10-year debt rose three basis points this week, the biggest increase since Feb. 26, to 7.13 percent in Mumbai, according to data from the central bank’s trading system. It jumped six basis points on Monday after the government named Patel as Rajan’s successor over the weekend. It rose one basis point Friday.

Bonds had rallied after Rajan’s June 18 announcement that he will return to academia, pushing the benchmark 10-year yield to 7.08 percent on Aug. 11, the lowest since September 2009.

The rupee was steady this week at 67.0575 per dollar, according to prices from local banks compiled by Bloomberg. The currency was little changed Friday.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE