India 10-Year Bonds Fall for Seventh Day as Data Spur Taper Bets

India’s 10-year bonds fell for a seventh day on concern outflows from local-currency debt may quicken after improving U.S. economic data fueled bets the Federal Reserve will cut monetary stimulus.

U.S. gross domestic product climbed at a 3.6 percent annualized rate in the third quarter, the most since the first quarter of 2012, figures showed yesterday. Another report showed jobless claims in the world’s largest economy unexpectedly fell last week. Global investors have cut holdings of Indian sovereign notes by more than $14 billion since mid-May on signs the Fed is preparing to reduce $85 billion of monthly bond-buying that has fueled fund flows to emerging markets.

The yield on the 8.83 percent securities due November 2023 jumped seven basis points to 8.85 percent in Mumbai, prices from the central bank’s trading system show. The rate rose 12 basis points, or 0.12 percentage point, this week.

“Markets are worried about tapering and that’s keeping Indian bonds in check,” said Sagar Shah, associate vice president for treasury at Ratnakar Bank Ltd. in Mumbai. “We have a few data-heavy days ahead of us, right from the U.S. nonfarm payrolls numbers today to the central bank policy mid-December.”

U.S. employers probably added 185,000 workers to nonfarm payrolls last month, helping push down the unemployment rate to match a five-year low, data due today may show, according to Bloomberg surveys of economists. The Federal Open Market Committee meets Dec. 17-18 to discuss policy after minutes of their last meeting in October showed officials may reduce stimulus should the economy improve as anticipated.

Rate Review

India’s economy grew a faster-than-estimated 4.8 percent in the third quarter from a year earlier, compared with 4.4 percent in the previous period, a report showed last month. Wholesale prices rose 7 percent year-on-year in October, the fastest pace since February.

The Reserve Bank of India will study data, including food prices and exchange-rate depreciation, before deciding whether to increase benchmark borrowing costs for a third straight meeting, Governor Raghuram Rajan said Nov. 13. He raised the repurchase rate by 25 basis points each in September and October, taking it to 7.75 percent. The next review is due Dec. 18, two days after the government releases wholesale-price inflation figures for November.

The one-year interest-rate swap, a derivative contract used to guard against fluctuations in funding costs, climbed six basis points to 8.47 percent today, the most since Nov. 12, data compiled by Bloomberg show. The rate rose two basis points this week.

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