Indian Swaps Fall to Two-Year Low as Oil Eases Inflation Burden

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India’s one-year interest-rate swaps declined to a two-year low on optimism a slide in Brent crude will slow inflation in the net oil-importing nation.

Consumer prices rose 3.78 percent in July from a year earlier, the slowest pace since November, and below the Reserve Bank of India’s 6 percent target for January. Brent has dropped about 19 percent this year and prices have more than halved from a 2014 peak. India imports three quarters of its oil requirement.

“Markets are reacting to the drop in oil prices,” said Paresh Nayar, the Mumbai-based head of currency and money markets at FirstRand Ltd. The slump in oil prices means inflation will be less of a problem, he said.

The fixed payment to receive a floating rate declined one basis point to 7.29 percent, the lowest level since June 2013, data compiled by Bloomberg show. The 10-year bond yield rose one basis point to 7.75 percent, according to prices from the central bank’s trading system.

RBI Governor Raghuram Rajan left the benchmark repurchase rate at 7.25 percent at an Aug. 4 policy review after three reductions this year, and said he will monitor developments before any further cuts.

The rupee fell 0.4 percent to 65.55 a dollar, the lowest closing level since September 2013. It has weakened 2.2 percent this month after the trade deficit widened in July to the highest since November.