India’s 2024 Bonds Fall as Yields at Three-Week Low Deter Buyers

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Indian sovereign bonds due in 2024 fell on speculation a drop in yields to a three-week low was overdone.

The yield on the securities due July 2024, the current 10-year benchmark, rose two basis points to 7.90 percent Monday, snapping a three-day decline, prices from the central bank’s trading system showed. It slumped 23 basis points last week to 7.88 percent on Friday, the lowest close since June 1, as a pickup in monsoon rains eased inflation concerns.

“Investors have booked profits on recent gains,” said Shakti Satapathy, a senior strategist for fixed income at A K Capital Services Ltd. in Mumbai.“Sentiment is still bullish as good rainfall will provide the central bank room to cut rates further.”

India’s monsoon rainfall has been 21 percent above normal since the start of the season on June 1, with 78 percent of the nation receiving excess to normal showers, the weather office said Monday. The June-September rainfall accounts for more than 70 percent of annual precipitation.

Investors have cheered better-than-expected rains as the department had forecast them to be 88 percent of the 50-year average this year. Inadequate rainfall may stoke food inflation. Reserve Bank of India Governor Raghuram Rajan linked further interest-rate cuts to the strength of the monsoons when he cut benchmark borrowing costs for a third time this year on June 2.

The yield on sovereign bonds due May 2025, the new 10-year debt issued last month, climbed three basis point to 7.74 percent on Monday.

The rupee gained for a fourth day, rising 0.1 percent to 63.5125 a dollar, according to prices from local banks compiled by Bloomberg.