Indian 10-year bonds have gained pushing yields to the lowest in almost three years
India's 10-year bonds gained, pushing yields to the lowest in almost three years, as declines in oil prices fanned speculation inflation will slow.
Benchmark notes ended two days of losses after crude oil dropped 6.8 percent yesterday in New York. The inflation rate in India, which imports almost three-quarters of the oil it uses, fell to a five-month low in the week ended Nov. 8, a government report showed on Nov. 20. Slowing inflation helps preserve the purchasing power of the fixed income debt pays.
``The trend of the decline in crude oil prices suggests it is not going to be a concern for a long time,'' said Paresh Nayar, chief foreign exchange and bond trader at Development Credit Bank Ltd. in Mumbai. ``Bonds have scope to extend gains in the short-term.''
The yield on the 8.24 percent note due April 2018 dropped 12 basis points to 7.10 percent as of 2:20 p.m. in Mumbai, according to the central bank's trading system. That's the lowest since January 2006, according to data compiled by Bloomberg. The price climbed 0.83 per 100 rupee face amount to 107.70.
The yield may drop as low as 7 percent in the next few days, Nayar said.
Author:
Jo Amey
