Indian Bond Yield Climbs From 2010 Low Before Sale; Swaps Steady

India’s bonds due 2022 fell, with the yield climbing from the lowest level in almost three years, before the government auctions new debt this week.

The finance ministry plans to raise 150 billion rupees ($2.8 billion) from the securities offering, according to a federal borrowing calendar published by the central bank. Bonds gained earlier as economists predicted the central bank will cut interest rates on May 3 for the third time this year.

“Supply of debt is likely to cap the gains” in bonds, L. Subramanian, an analyst at Mumbai-based ICICI Bank Ltd., wrote in a research report today.

The yield on the 8.15 percent bonds due June 2022 rose two basis points, or 0.02 percentage point, to 7.76 percent in Mumbai, according to data compiled by Bloomberg. It reached 7.72 percent earlier, the lowest level for a benchmark 10-year note since July 2010. The rate declined 20 basis points this month as official data on April 15 showed wholesale prices rose 5.96 percent in March, the least since November 2009.

Twenty-five of 31 economists surveyed by Bloomberg predict the Reserve Bank of India will lower its repurchase rate by 25 basis points to 7.25 percent, one forecasts a 50 basis point reduction and five see no change.

The one-year interest-rate swap, a derivative contract used to guard against fluctuations in funding costs, was unchanged from April 26 at 7.215 percent, according to data compiled by Bloomberg.

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