India 10-Year Bonds Jump as Yield Near 2-Month High Lures BuyersShikhar Balwani
India’s 10-year government bonds rose on speculation yields near the highest level in two months attracted investors.
The yield on the 8.83 percent sovereign notes due November 2023 slid seven basis points, or 0.07 percentage point, to 8.84 percent in Mumbai, the most since Jan. 20, according to the central bank’s trading system. It climbed four basis points to 8.90 yesterday, just shy of the highest level since Dec. 27 that was reached last week. Bonds extended gains as Russia stepped back from escalating the crisis in Ukraine.
“There is definitely some attraction with regard to the yields,” said Sagar Shah, associate vice-president for treasury at Ratnakar Bank Ltd. in Mumbai. “Bonds are unlikely to see a great rally, especially given the uncertainty around elections and given that debt supply will resume from April.”
Finance Minister Palaniappan Chidambaram has announced gross borrowing of 5.97 trillion rupees ($96.5 billion) for the year starting April 1, from a revised 5.64 trillion rupees for the current period. Securities due in a decade fell in February by the most since November on concern quarterly corporate tax payments due this month will drain cash from the financial system, damping demand for debt.
Reserve Bank of India Governor Raghuram Rajan warned Feb. 23 that inflation remains the biggest threat to the Indian economy. Rajan, who has raised borrowing costs three times since taking office in September, said that any further action will depend on data. Wholesale prices climbed 5.05 percent in January from a year earlier, the least since May, and the consumer-price index jumped 8.79 percent, the smallest gain in two years.
One-year interest-rate swaps, derivative contracts used to guard against swings in funding costs, fell four basis points to 8.68 percent, data compiled by Bloomberg show.