The 10-year bonds advanced after RBI governor D Subbarao said the inflation rate, which touched a 16-month high in February, should start to moderate by July.
Yields dropped after Planning Commission deputy chairman Montek Singh Ahluwalia said on Monday India must aim to slow inflation to an “acceptable” level of 5% to 6%. The nation’s bonds have “priced in” at least a 100 bps increase in interest rates, said Anoop Verma, a fixed-income trader at Development Credit Bank in Mumbai.
“Efforts to curb inflation have increased the attractiveness of bonds as quite a bit of rate hikes have been factored in at these levels,” Verma said. “Supply of bonds will be the major concern now.”
The yield on the 6.35% note due January 2020 fell 1 basis point to 7.85%. The price rose 0.5, or 5 paise per Rs 100 face amount, to 89.90.
The central bank on March 19 increased the benchmark reverse repurchase rate to 3.5% from a record-low 3.25% and the repurchase rate to 5% from 4.75%. The wholesale-price inflation reached 9.89% in February.
“The Reserve Bank of India, sensitive to inflation concerns, is committed to maintaining the growth momentum,” Governor Subbarao said on Monday. “The challenge for us is to balance the requirements of growth against the concerns of inflation. We believe that by June-July, inflation should start moderating.”
Finance minister Pranab Mukherjee last month said the government plans to borrow Rs 4.57 lakh crore ($100.2 billion) in the financial starting April 1.
Source: http://economictimes.indiatimes.com/markets/bonds/Bonds-gain-as-RBI-says-inflation-to-slow-by-July/articleshow/5717661.cms
Yields dropped after Planning Commission deputy chairman Montek Singh Ahluwalia said on Monday India must aim to slow inflation to an “acceptable” level of 5% to 6%. The nation’s bonds have “priced in” at least a 100 bps increase in interest rates, said Anoop Verma, a fixed-income trader at Development Credit Bank in Mumbai.
“Efforts to curb inflation have increased the attractiveness of bonds as quite a bit of rate hikes have been factored in at these levels,” Verma said. “Supply of bonds will be the major concern now.”
The yield on the 6.35% note due January 2020 fell 1 basis point to 7.85%. The price rose 0.5, or 5 paise per Rs 100 face amount, to 89.90.
The central bank on March 19 increased the benchmark reverse repurchase rate to 3.5% from a record-low 3.25% and the repurchase rate to 5% from 4.75%. The wholesale-price inflation reached 9.89% in February.
“The Reserve Bank of India, sensitive to inflation concerns, is committed to maintaining the growth momentum,” Governor Subbarao said on Monday. “The challenge for us is to balance the requirements of growth against the concerns of inflation. We believe that by June-July, inflation should start moderating.”
Finance minister Pranab Mukherjee last month said the government plans to borrow Rs 4.57 lakh crore ($100.2 billion) in the financial starting April 1.
Source: http://economictimes.indiatimes.com/markets/bonds/Bonds-gain-as-RBI-says-inflation-to-slow-by-July/articleshow/5717661.cms
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