India’s 10-year bonds rose the most in four weeks after yields at their highest in 15 months lured buyers.
Yields fell for a second day after food inflation decelerated to 17.28 per cent in the week to January 2 from a year earlier. The prices rose 19.95 per cent last month, the fastest pace since 1998. Yields also dropped because the government is nearing completion of its record borrowing of Rs 4.51 lakh crore for the current financial year, said Krish Ramkumar, who manages the equivalent of $1 billion of Indian debt at Sundaram BNP Paribas Asset Management in Mumbai.
“Bond prices have risen because these were good levels to buy,” said Ramkumar. “While food prices dropped, wholesale price inflation was on expected lines and that encouraged investors.”
The yield on the 6.35 per cent note due January 2020 fell eight basis points to 7.63 per cent as of the 5:30 pm close in Mumbai, according to the central bank’s trading system. The price rose 0.55 per cent, or 55 paise per Rs 100 face amount, to Rs 90.20. Earlier, it touched 7.74 per cent, the highest rate for a benchmark 10-year note since October 2008.
The central bank will auction Rs 10,000 crore ($2.2 billion) of bonds maturing in 2016, 2020 and 2027 tomorrow. The Reserve Bank of India is scheduled to auction Rs 15,000 crore of bonds in the remainder of the financial year, following this week’s debt sales.
