India’s 10-Year Yield Rises to Two-Month High Before Fed Meeting

India’s 10-year bond yield rose to a two-month high before a Federal Reserve meeting this week that may give clues on the timing of U.S. interest-rate increases.

The Federal Open Market Committee meets March 17-18, with investors keen to see if policy makers drop a pledge to be “patient” on the timing of the rate increase. Higher U.S. rates will damp demand for emerging-market assets. India’s wholesale prices fell 2.06 percent in February, the most since at least 2005, official data showed today. A report last week showed the consumer price index, the central bank’s main inflation gauge, climbed faster than estimated. The rupee rose.

“Bonds have factored in some bit of the Fed’s action, but any indication that the rate increase is happening before June will be a negative,” said Harish Agarwal, a fixed-income trader at FirstRand Ltd. in Mumbai. “In terms of inflation, CPI remains the key determinant for policy making.”

The yield on sovereign notes due July 2024 rose one basis point to close at 7.81 percent in Mumbai, prices from the central bank’s trading system show. That’s the highest since January 12.

Consumer prices rose 5.37 percent last month from a year earlier, higher than January’s revised 5.19 percent pace and the 5.21 percent median estimate in a Bloomberg survey. That spurred speculation the Reserve Bank of India, which has cut borrowing costs twice this year, may refrain from easing policy further.

The rupee advanced 0.3 percent to 62.81 a dollar, according to prices from local banks compiled by Bloomberg. India’s trade deficit narrowed in February, official data showed after the close of markets on Friday.

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