India’s 10-Year Bonds Extend Four-Week Gain on Rate-Cut Outlook
India’s 10-year bonds gained, extending a four-week rally, on speculation slowing inflation will prompt the central bank to cut borrowing costs.
Twenty-two of 26 economists surveyed by Bloomberg predict the Reserve Bank of India will lower its repurchase rate by 25 basis points to 7.25 percent on May 3, one forecasts a 50 basis point reduction and three no change. Ten-year yields declined 22 basis points since March 29 as official data on April 15 showed wholesale prices rose 5.96 percent in March, the least since November 2009. Falling crude prices will ease pressure on the current-account deficit, according to DBS Group Holdings Ltd.
“Prices below 6 percent are a sign of comfort for policy makers to take growth-support measures,” said Radhika Rao, an economist in Singapore at DBS. “Yields will stabilize at these levels unless we see further declines in commodity prices.”
The yield on the 8.15 percent bonds due June 2022 dropped one basis point, or 0.01 percentage point, to 7.738 percent as of 9:16 a.m. in Mumbai, data compiled by Bloomberg show. It reached 7.735 percent on April 23, the lowest level for a benchmark 10-year note since July 2010.
Crude prices have declined 13.7 percent to $102.65 a barrel from this year’s high of $118.90 reached on Feb. 8. India imports 80 percent of its annual oil requirement.
The nation’s gross domestic product rose 5 percent in the fiscal year ended March 31, the weakest pace since 2003, the statistics agency estimates. India’s growth outlook is improving, the International Monetary Fund said in a regional report published today. The RBI has cut its benchmark interest rate by 50 basis points this year
The one-year interest-rate swap, a derivative contract used to guard against fluctuations in funding costs, fell one basis point to 7.21 percent, according to data compiled by Bloomberg.
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