Currency corner: Bonds decline for a second day on inflation concern
10-year bonds dropped for a second day on speculation the central bank will boost borrowing costs next week for a sixth time this year
By ET Bureau | Updated:
India’s 10-year bonds dropped for a second day on speculation the central bank will boost borrowing costs next week for a sixth time this year to slow increases in food prices.
An index measuring wholesale prices of farm products including rice and wheat rose 10.05% in the week ended August 20 from a year earlier, the fastest pace in four months, a government report showed on September 1.
India’s relatively fast economic growth may encourage RBI to lift its repurchase rate by 25 bps to 8.25% at a meeting on September 16, said J Moses Harding, an executive VP at IndusInd Bank. “Inflation concerns persist and growth is also robust,” Harding said.
“Domestic factors are still bearish for bonds although some expect the central bank to temper its hawkish language due to global headwinds.” The yield on the 7.8% bonds due April 2021 rose one basis point, or 0.01 percentage point, to 8.31% at the close in Mumbai, according to the central bank’s trading system.
The rate has increased 39 basis points this year, the most after Vietnam among Asia’s local-currency debt markets. Volatility in global commodity prices continues to be a “threat to price stability” in India, Deepak Mohanty, an executive director at the RBI, said last week.
An index measuring wholesale prices of farm products including rice and wheat rose 10.05% in the week ended August 20 from a year earlier, the fastest pace in four months, a government report showed on September 1.
India’s relatively fast economic growth may encourage RBI to lift its repurchase rate by 25 bps to 8.25% at a meeting on September 16, said J Moses Harding, an executive VP at IndusInd Bank. “Inflation concerns persist and growth is also robust,” Harding said.
“Domestic factors are still bearish for bonds although some expect the central bank to temper its hawkish language due to global headwinds.” The yield on the 7.8% bonds due April 2021 rose one basis point, or 0.01 percentage point, to 8.31% at the close in Mumbai, according to the central bank’s trading system.
The rate has increased 39 basis points this year, the most after Vietnam among Asia’s local-currency debt markets. Volatility in global commodity prices continues to be a “threat to price stability” in India, Deepak Mohanty, an executive director at the RBI, said last week.
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