In­dian sov­er­eign bonds rise for sec­ond day on in­fla­tion op­ti­mism

The Pak Banker - - BUSINESS -

NEW DELHI: In­dia's 10- year sov­er­eign bonds ad­vanced the most this week on spec­u­la­tion the re­cent de­cline in oil prices will help slow in­fla­tion from a ninemonth high. Brent crude prices have re­treated 4.8 per­cent in Au­gust fol­low­ing July's 18 per­cent plunge. That cuts im­port costs for In­dia, which gets about three quar­ters of its oil from abroad. Re­serve Bank of In­dia Gover­nor Raghu­ram Ra­jan held in­ter­est rates un­changed at an Aug. 4 pol­icy re­view af­ter con­sumer-price gains ac­cel­er­ated to 5.40 per­cent in June, near his tar­get of 6 per­cent by Jan­uary. The rupee was steady Thurs­day.

"Oil's drop can en­sure in­fla­tion re­mains sub­dued," said Vi­jay Sharma, ex­ec­u­tive vice pres­i­dent for fixed in­come at PNB Gilts Ltd. in New Delhi. "That will cre­ate room for the cen­tral bank to cut rates once more be­fore the year ends." The yield on the notes due May 2025 fell one ba­sis point to 7.83 per­cent as of 11:02 a.m. in Mum­bai, ac­cord­ing to prices from the RBI's trad­ing sys­tem. It can drop to 7.65 per­cent by Dec. 31, Sharma pre­dicts. Ra­jan left the bench­mark re­pur­chase rate at 7.25 per­cent af­ter three re­duc­tions this year and said the cen­tral bank will mon­i­tor de­vel­op­ments for room to ease pol­icy fur­ther as it awaits greater trans­mis­sion of pre­vi­ous cuts. The rupee was lit­tle changed at 63.7675 a dol­lar, ac­cord­ing to prices from lo­cal banks com­piled by Bloomberg. The cur­rency has risen 0.6 per­cent this month in Asia's best per­for­mance.

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