India 10-Year Bonds Climb a Third Day as Debt Sales Seen Slowing

India’s 10-year bonds rose for a third day on speculation a drop in sovereign debt sales after November will spur demand for existing securities.

The government plans to borrow 450 billion rupees ($7.2 billion) in December, compared with 750 billion rupees of issuance scheduled for this month, according to an auction calendar published by the Reserve Bank of India. India sold new 10-year notes last week and demand is rising for the securities, according to Development Credit Bank Ltd. and IDBI Bank Ltd.

The yield on the 8.83 percent notes due November 2023 slid five basis points, or 0.05 percentage point, to 8.69 percent in Mumbai, according to prices from the central bank’s trading system. The rate has fallen 10 basis points in the week.

“There is optimism as the month of November, where we saw huge supply coming into the markets, is drawing to an end,” said Sagar Shah, associate vice president for treasury at Ratnakar Bank Ltd. in Mumbai. He predicts the 10-year yield will drop toward 8.60 percent by the end of December.

The RBI will study data, including food prices and exchange-rate depreciation, before deciding whether to increase the benchmark rate for a third straight meeting, Governor Raghuram Rajan said Nov. 13. He raised the key repurchase rate by 25 basis points to 7.75 percent on Oct. 29, the second consecutive increase, to curb inflation.

Wholesale prices in India rose 7 percent in October from a year earlier, the fastest pace since February, according to the latest government data.

The one-year interest-rate swap, a derivative contract used to guard against fluctuations in funding costs, dropped five basis points to 8.50 percent, data compiled by Bloomberg show.

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