Indian Bonds Have Weekly Advance on Cash Injections, Rupee Gains

India’s 10-year government bonds completed a weekly advance on speculation cash injections by the central bank and a rebounding rupee buoyed demand.

The Reserve Bank of India added 750 billion rupees ($12.5 billion) to the financial system via seven- and 14-day repurchase contracts today, it said in a statement. The government met its target to sell 160 billion rupees of debt due from 2022 to 2043 at an auction. The rupee has rallied 0.8 percent against the dollar since April 25 after four straight weeks of declines. A weaker currency stokes inflation as India imports about 80 percent of its oil.

The yield on the 8.83 percent sovereign bonds due November 2023 slid eight basis points, or 0.08 percentage point, this week to 8.81 percent in Mumbai, prices from the central bank’s trading system show. That was the lowest level since March 28. The yield dropped two basis points from April 30 after local markets were shut yesterday for a public holiday.

“The currency’s strength and the central bank’s liquidity support are aiding sentiment,” said Harish Agarwal, a fixed-income trader in Mumbai at FirstRand Ltd. It’s uncertain how long the central bank will keep injecting cash, he said.

One-year interest-rate swaps, derivative contracts used to guard against swings in funding costs, fell three basis points this week and one basis point today to 8.60 percent, according to data compiled by Bloomberg.

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