You are using an older browser version. Please use a supported version for the best MSN experience.

Indian bonds drop as inflation, supply offset exit poll optimism

LiveMint logoLiveMint 13-05-2014 Shikhar Balwani

Mumbai: India’s 10-year bonds fell, snapping a three-day gain, as faster inflation and an impending debt auction outweighed optimism over exit polls that signalled a clear victory for the main opposition party.

Consumer prices quickened for a second month in April, official data showed after the close of markets on Monday. India’s government plans to sell `20,000 crore worth of bonds maturing between 2022 and 2043 on 16 May, the Reserve Bank of India (RBI) said in a statement on Monday. The Bharatiya Janata Party (BJP) and its allies will probably win 249 to 340 seats in national elections, six exit polls show, with 272 needed for a majority. Voting began 7 April and ended on Monday.

The yield on the 8.83% debt due November 2023 rose 2 basis points, or 0.02 percentage point, to 8.75% as of 10:28am in Mumbai, prices from the RBI trading system show. The rate slumped to the lowest since 12 March yesterday. Local markets are shut on Wednesday for a holiday.

“The markets are concerned about inflation, and we have a large auction at the end of this truncated week,” Aneesh Srivastava, chief investment officer at IDBI Federal Life Insurance Co., said by phone from Mumbai. “That’s offsetting the positive sentiment lent by the exit poll results.”

Bonds rallied over the past month on expectations of a stable government after the polls and as cash injections by the RBI and a strengthening rupee buoyed demand. The election results will be announced on 16 May.

The consumer-price index rose 8.59% from a year earlier, compared with 8.31% in March. The median estimate in a Bloomberg survey had predicted an 8.5% increase.

One-year interest-rate swaps, derivative contracts used to guard against swings in funding costs, dropped 1 basis point on Monday to 8.52%, data compiled by Bloomberg show. Bloomberg

More From LiveMint

image beaconimage beaconimage beacon