By -
Jun 18, 2014
India’s one-year interest-rate swaps
rose to a two-week high on concern below-normal rainfall and a
decline in the rupee will fuel inflation, reducing scope for
monetary easing.
The monsoon, which accounts for more than 70 percent of the nation’s annual rainfall, has been 49 percent lower than the 50-year average since June 1, according to a report on the weather department’s website yesterday. The rupee dropped for a third day in four, adding to concern that a spike in crude oil prices as a result of the Iraq conflict will spur inflation in India, which imports about 80 percent of its fuel.
“While India’s new government seems committed to contain inflation, the monsoon and the Iraq situation are things beyond its control,” said Vijay Sharma, executive vice president for fixed income at PNB Gilts Ltd. in New Delhi. “Bond markets are a bit edgy. We don’t see the Reserve Bank of India cutting rates any time in 2014.”
One-year swaps, derivative contracts used to guard against swings in funding costs, increased four basis points to 8.33 percent as of 10:10 a.m. in Mumbai, data compiled by Bloomberg show. That’s the highest level since June 2. The yield on the 8.83 percent government bonds due November 2023 rose three basis points, or 0.03 percentage point, to 8.63 percent, prices from the RBI’s trading system show.
The RBI and the government have to be vigilant on inflation, Governor Raghuram Rajan said in Mumbai yesterday. He’s raised the benchmark repurchase rate by 75 basis points since taking charge in September to rein in prices and left the rate unchanged at 8 percent for a second straight meeting on June 3.
To contact the reporter on this story: Shikhar Balwani in Mumbai at sbalwani@bloomberg.net
To contact the editors responsible for this story: James Regan at jregan19@bloomberg.net Simon Harvey, Amit Prakash
The monsoon, which accounts for more than 70 percent of the nation’s annual rainfall, has been 49 percent lower than the 50-year average since June 1, according to a report on the weather department’s website yesterday. The rupee dropped for a third day in four, adding to concern that a spike in crude oil prices as a result of the Iraq conflict will spur inflation in India, which imports about 80 percent of its fuel.
“While India’s new government seems committed to contain inflation, the monsoon and the Iraq situation are things beyond its control,” said Vijay Sharma, executive vice president for fixed income at PNB Gilts Ltd. in New Delhi. “Bond markets are a bit edgy. We don’t see the Reserve Bank of India cutting rates any time in 2014.”
One-year swaps, derivative contracts used to guard against swings in funding costs, increased four basis points to 8.33 percent as of 10:10 a.m. in Mumbai, data compiled by Bloomberg show. That’s the highest level since June 2. The yield on the 8.83 percent government bonds due November 2023 rose three basis points, or 0.03 percentage point, to 8.63 percent, prices from the RBI’s trading system show.
The RBI and the government have to be vigilant on inflation, Governor Raghuram Rajan said in Mumbai yesterday. He’s raised the benchmark repurchase rate by 75 basis points since taking charge in September to rein in prices and left the rate unchanged at 8 percent for a second straight meeting on June 3.
To contact the reporter on this story: Shikhar Balwani in Mumbai at sbalwani@bloomberg.net
To contact the editors responsible for this story: James Regan at jregan19@bloomberg.net Simon Harvey, Amit Prakash
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