Indian Bond Yields Near This Week’s Low Before RBI Debt Purchase

India’s benchmark bond yields were near this week’s lowest level amid speculation a central bank plan to purchase government debt will spur demand.

The Reserve Bank of India will offer to buy as much as 100 billion rupees ($1.9 billion) of notes at an open-market auction tomorrow, it said in a statement on Feb. 12. The RBI has bought 1.2 trillion rupees of securities in the year that began April 1, up from 336 billion rupees a year earlier, according to data compiled by Bloomberg. Wholesale prices probably rose 6.98 percent in January, the slowest pace since November 2009, a Bloomberg survey showed before data due today.

“The open-market operations have capped yields and the RBI is likely to infuse 300 billion rupees more by March by buying debt,” said Vivek Rajpal, a strategist at Nomura Holdings Inc. in Mumbai. “If inflation comes below 7 percent, bonds will remain supported.”

The yield on the 8.15 percent notes due June 2022 was 7.846 percent as of 10:15 a.m. in Mumbai, compared with yesterday’s level of 7.845 percent that was the lowest since Feb. 8, according to the central bank’s trading system.

The one-year interest-rate swap, a derivative contract used to guard against fluctuations in funding costs, was steady at 7.65 percent, according to data compiled by Bloomberg.

To contact the reporter on this story: V. Ramakrishnan in Mumbai atrvenkatarama@bloomberg.net

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