India Bond Investors Brace for CPI Data to Gauge Rate-Cut Option

  • Sovereign Ten-year yield holds near lowest since 2013
  • March consumer price gains slowed to 5%: Bloomberg survey

Indian bond investors are bracing for inflation data for signs a further slowdown in price gains will allow the central bank to add to its interest-rate cuts.

The yield on the 10-year note held near the lowest for a benchmark of that maturity since 2013 after the Reserve Bank of India lowered the key repurchase rate last week by 25 basis points to 6.5 percent. It said after that meeting it will monitor the seasonal monsoon rains for any impact on consumer prices to gauge if there’s room to ease monetary policy further.

The yield on the January 2026 securities was little changed at 7.42 percent in Mumbai, according to the central bank’s trading system. It earlier dropped to as low as 7.40 percent. Consumer prices rose 5 percent last month from a year earlier, based on the median estimate in a Bloomberg survey before data Tuesday, compared with 5.18 percent in February.

“The market is expecting inflation to come in lower, which will help the central bank to stick to its easing cycle, ” said Debendra Kumar Dash, a Mumbai-based fixed-income trader at DCB Bank Ltd. “The initial forecast for an above-normal monsoon is adding to the positive sentiment.”

Precipitation in the rainy season starting in June is seen at 106 percent of a 50-year average of 89 centimeters (35 inches) as the El Nino that often triggers dry weather in the region weakens, the India Meteorological Department, said in a statement on Tuesday. The forecast has a margin of error of 5 percent, it said

The rupee was little changed at 66.4250 per dollar, according to prices from local banks compiled by Bloomberg. The currency has weakened 0.4 percent this year in Asia’s worst performance.

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