Bonds rise as yield at 16-mth high brings in investors

The 10-year bonds rose, snapping a five-day slide, as yields near the highest level in 16 months attracted investors. Banks and securities companies may increase purchases of the debt as federal and state governments haven’t scheduled bond sales in the remainder of February, said Arvind Sampath, head of interest-rate trading at Standard Chartered Bank in Mumbai.

The yield on the benchmark note on Monday reached the highest level since October 2008 after inflation accelerated to a 15-month high in January.

“Yield levels look good for investors to re-enter the bond market as there’s no immediate debt supply scheduled,” Mr Sampath said. “All the negative data that was due, including inflation, is now out of the way.”

The yield on the 6.35% note due January 2020 fell one basis point to 7.87%, according to the central bank’s trading system. A basis point is 0.01 percentage point.

The price rose 0.07, or 7 paise per Rs 100 face amount, to 89.72.

The cost of five-year interest-rate swaps, or derivative contracts used to guard against fluctuations in borrowing costs, was little changed. The rate, a fixed payment made to receive floating rates, was at 7.14%.