Ten-year bonds climb the most in three weeks

Ten-year bonds rose the most in more than three weeks, paring a monthly loss, on speculation investors will opt for the safety of debt as signs the global economic recovery is faltering reduces the allure of shares.

Yields on benchmark debt trimmed this month’s increase to 13 basis points after a report showed personal income in the US rose less than economists predicted. The Reserve Bank of India has raised interest rates four times this year to cool inflation. The economy expanded last quarter at the fastest pace since 2007, the government said on Tuesday.

“Investors are probably flocking to safety as the global growth outlook is still uncertain,” said Krishnamurthy Harihar, a treasurer at FirstRand in Mumbai. “This may temper the pace of rate increases.”

The yield on the 7.8% note due May 2020 fell six basis points, the most since August 6, to 7.93% at the close of trade on Tuesday. The price rose 0.39, or 39 paise per `100 face amount, to 99.11. A basis point is 0.01 percentage point.

The Sensex has lost 0.2% since August 29, extending last week’s 2.2% decline, as economists said before reports on Tuesday that the rebound in US home prices probably slowed, while consumer confidence languished near a five-month low.

Property values in 20 cities in the world’s largest economy climbed 3.5% in June from the same month last year, down from a 4.6% gain in the 12 months to May. Another report may show sentiment stagnated in August.
The cost of one-year interest-rate swaps, or derivative contracts used to guard against fluctuations in borrowing costs, decreased. The rate, a fixed payment made to receive floating rates, fell two basis points to 6.11%.