Indian Bond Yields Hold Near One-Week Low as Monsoon Picks Up

India’s 10-year bond yield held near the lowest level in more than a week as a pickup in monsoon rains eased concern inflation will accelerate.

The shortfall in the June-September monsoon, which accounts for more than 70 percent of India’s annual precipitation, is 36 percent of the 50-year average, the weather department said yesterday. That compared with 43 percent on July 11. Consumer-price inflation was 7.31 percent in June, the lowest since the index was created at the start of 2012, official data showed this week. Wholesale prices rose 5.43 percent from a year earlier, the least in four months.

The yield on India’s sovereign notes due November 2023 was at 8.737 percent in Mumbai, compared with 8.724 yesterday, the lowest level since July 7, according to the Reserve Bank of India’s trading system.

“Things are not as bearish now as they looked a week back, thanks to positive inflation data and the slight improvement in the monsoon,” said Sagar Shah, deputy vice-president for treasury at RBL Bank in Mumbai. Ten-year yields will probably stay between 8.60 percent and 8.80 percent in the near term, he said.

RBI Governor Raghuram Rajan has raised the benchmark repurchase rate by 75 basis points to 8 percent since taking charge in September to rein in price pressures. A weak start to the monsoon has delayed the planting of some crops, threatening to push up food costs that account for about half of the consumer-price index.

One-year interest-rate swaps, derivative contracts used to guard against swings in funding costs, rose one basis point, or 0.01 percentage point, to 8.41 percent, data compiled by Bloomberg show.

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