The 10-year bonds advanced for the first time in three days after data published today showed food inflation slowed.
The yield on the 7.8% bonds due April 2021 fell two basis points, or 0.02 percentage point, to 8.30% on Thursday. The central bank may refrain from boosting borrowing costs next week as growth is showing signs of slowing, said RS Chauhan, chief dealer of fixed-income and currencies at State Bank of Bikaner & Jaipur.
?Food inflation is easing and that?s a positive for bonds,? Mumbai-based Chauhan said. ?The central bank would like to balance growth and inflation.?
The Reserve Bank of India has raised its repurchase rate by 1.75 percentage points this year to 8%. The next policy review is scheduled on September 16. India?s inflation may decelerate below 7% by the end of March 2012, Planning Commission deputy chairman Montek Singh Ahluwalia said.
The cost of one-year interest-rate swaps, or derivative contracts used to guard against fluctuations in borrowing costs, fell three basis points to 7.61%, according to data compiled by Bloomberg.
Yields on certificates of deposit were mixed on Thursday with banks raising R2,345 crore, a sharp drop from Wednesday’s R4,260 crore.
Three-month yields have moved up because of higher supply as banks are trying to mobilise more funds owing to outflow on account of advance tax, said a senior dealer with a foreign bank.
