Indian Bonds Decline for a Second Day as Debt Outflows Increase

India’s benchmark 10-year sovereign bonds fell for a second day on speculation global investors pared holdings of rupee-denominated debt to book profits.

Foreign funds reduced holdings of local government and corporate notes by 60.4 billion rupees ($905 million) through Oct. 13, set for the biggest monthly sale since June. A strengthening dollar may trigger more outflows from emerging-markets, which could pressure local assets, according to Trust Capital Services India Pvt. The Bloomberg Dollar Index, which tracks the greenback against a basket of peers, has strengthened 1.7 percent this month.

“Foreign investors seem to be booking profits in the face of a strengthening dollar and that is weighing on Indian bonds,” said Sandeep Bagla, Mumbai-based associate director at Trust Capital Services. “I expect the market would consolidate for some more time.”

The yield on notes due January 2026 rose two basis points Friday and for the week to 6.75 percent in Mumbai, according to prices from the RBI’s trading system. The yield fell eight basis points last week on optimism slowing inflation will give the central bank room to add to this month’s interest-rate cut.

Consumer prices rose 4.3 percent in September from a year earlier, the slowest pace in 13 months, official data showed after markets shut on Thursday. That’s below the 4.6 percent median estimate in a Bloomberg economist survey.

The rupee was little changed from Oct. 7 at 66.7150 per dollar, according to prices from local banks compiled by Bloomberg. The currency has weakened 0.8 percent this year in Asia’s third-worst performance. It gained 0.3 percent Friday.

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