India's 10-Year Bond Yield at One-Week Low Before Inflation Data

  • Consumer prices rose 3.57% in August, a Bloomberg survey shows
  • Rupee strengthens 0.3%, snapping two straight days of losses

Indian sovereign bonds rose, pushing the 10-year yield to a one-week low, before data due Monday that may show inflation slowed last month.

Consumer prices may have risen 3.57 percent in August from a year earlier, according to the median estimate in a Bloomberg survey. That compares with July’s increase of 3.78 percent, which was the slowest in eight months. Wholesale prices fell 4.95 percent in August, the Commerce Ministry said in a statement earlier today. The median of 32 economists in a Bloomberg survey had predicted a 4.4 percent decline.

Indian bonds are outperforming their largest emerging-market peers this quarter as investors anticipate a fourth interest-rate cut in 2015. The yield on the notes due May 2025 fell one basis point to 7.76 percent in Mumbai, posting its lowest close since Sept. 4, according to prices from the central bank’s trading system.

“We expect the inflation data to come in lower than the previous month,” said Soumyajit Niyogi, an interest-rate strategist at SBI DFHI Ltd. in Mumbai. “The CPI figure and the outcome of the Federal Reserve’s meeting are the two key events for the bond markets this week.”

Traders are holding odds at 28 percent that the Fed will raise borrowing costs at its Sept. 16-17 meeting, a move that will reduce the allure of emerging markets. The 51 percent drop in Brent crude prices over the past year has helped curb living costs in India, which relies on imports for 80 percent of its oil needs.

The Reserve Bank of India, which has lowered the repurchase rate by 75 basis points this year, next reviews policy on Sept. 29. Investors have earned 2.4 percent on rupee-denominated government bonds since the end of June, Bloomberg indexes show, the highest return in the BRIC group of nations that also includes Brazil, Russia and China.

Data on consumer inflation, the central bank’s benchmark for monetary policy, will be announced after the close of markets in Mumbai on Monday.

The rupee climbed 0.3 percent to 66.33 a dollar, according to prices from local banks compiled by Bloomberg.

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