Indian Bonds Drop Most in a Month as Inflation Seen Accelerating

  • Yield on 10-year notes at highest level since Sept. 29
  • Rising commodity prices cause for concern: Trust Investment

India’s 10-year sovereign bond yield climbed the most in a month ahead of a report that may show inflation accelerated from a nine-month low and as oil prices extended last week’s rally.

Consumer prices probably rose 4.40 percent in September from a year earlier, according to the median estimate in a Bloomberg survey before official data due after the close of markets Monday. That compares with August’s 3.66 percent gain. Brent crude advanced after capping its biggest weekly increase since August on Friday, raising import costs for India, which buys about 80 percent of its oil from overseas. The rupee was steady.

The yield on the government notes due May 2025 jumped four basis points, the most since Sept. 7, to 7.58 percent in Mumbai, according to prices from the central bank’s trading system. It posted its highest close since Sept. 29, when the Reserve Bank of India surprised investors with a larger-than-estimated cut in interest rates.

“It’s not the time to be complacent,” said Sandeep Bagla, a Mumbai-based associate director at Trust Investment Advisors Pvt. “Global commodity prices, especially oil, have started firming up, which isn’t good news.”

Trust Investment expects the 10-year yield to stay in a range of 7.50 percent to 7.65 percent this week, Bagla said. India will auction 56 billion rupees ($865.2 million) of debt quotas to foreign investors on Monday, enabling them to buy more of the nation’s sovereign notes.

The rupee was little changed at 64.7525 a dollar, prices from local banks compiled by Bloomberg show. The currency climbed 1.2 percent last week.

Before it's here, it's on the Bloomberg Terminal.