India 10-Year Bond Yield Drops Most Since July Before Inflation

Updated on

Indian bonds advanced, pushing the 10-year sovereign yield down by the most in nearly ten months, on speculation slowing inflation will allow the central bank to add to two interest-rate cuts this year.

Consumer prices probably rose 4.90 percent in April from a year earlier, the median estimate in a Bloomberg survey shows before data due on Tuesday. That’s less than an increase of 5.17 percent in March. Bonds climbed also as Brent crude prices dropped for a third day, reducing import costs for India, which relies on imports for 80 percent of its oil needs. The rupee gained for a second day.

“Lower crude oil prices and a broad expectation of slower inflation are driving bond gains,” said Ajay Manglunia, the head of fixed income at Edelweiss Financial Services Ltd. in Mumbai. “There’s a strong bidding sentiment for bonds.”

The yield on the 8.4 percent notes due July 2024 fell nine basis points, or 0.09 percentage point, to 7.89 percent in Mumbai, prices from the central bank’s trading system show. That’s the biggest decline for a benchmark 10-year debt since July 2014.

India stayed demands for back taxes on capital gains by foreign portfolio investors pending a report on the levy, the government’s latest step to defuse a row that dented sentiment toward the stock and bond markets.

The Reserve Bank of India cut the benchmark repurchase rate by 50 basis points to 7.50 percent in 2015 as a 49 percent drop in oil in the 12 months through March helped ease price pressures in Asia’s third-largest economy.

In the currency market, the rupee climbed 0.1 percent to 63.8550 a dollar in a second day of gains, prices from local banks compiled by Bloomberg show.