Bonds decline on speculation inflation to touch 3-month high

Ten-year bonds slipped on concern investors will refrain from adding to their positions before data tomorrow that economists forecast will show inflation accelerated to a three-month high in June.

Yields rose after the government said yesterday it will sell Rs 13,000 crore ($2.8 billion) of notes maturing in 2017, 2022 and 2027 on July 16. The wholesale price index increased 10.8 per cent last month from a year earlier, after climbing 10.2 per cent in May, according to the median estimate in a Bloomberg survey of economists.

The yield on the 7.8 per cent note due May 2020 rose one basis point, or 0.01 percentage point, to 7.62 per cent as of the 5:30 pm close in Mumbai, according to the central bank’s trading system. The price fell 0.06 per cent, or 6 paise per Rs 100 face amount, to Rs 101.21.

Re holds loss after Infosys reports lower earnings
The rupee held this week’s losses after Infosys Technologies, the nation’s second- biggest software exporter, reported a drop in quarterly earnings.

The currency declined by as much as 0.4 per cent in intraday trading on concern India’s export earnings will shrink as Europe’s debt crisis hampers the global economic recovery. Infosys said net income fell 2.6 per cent from a year earlier to Rs 1,490 crore ($318.5 million) in the last three months.

The rupee was at 46.78 per dollar as of the 5 pm close in Mumbai, compared with 46.77 yesterday. It has lost 0.3 per cent this week. The rupee is Asia’s worst-performing currency this month with a 0.7 per cent decline.

Offshore forwards indicated the Indian currency will trade at 47.36 to the dollar in three months, compared with expectations of 47.34 yesterday.

Call ends steady
Call money rate ended steady near RBI’s repo rate as demand for funds remained strong amid tight liquidity, dealers said.

The one-day interbank call rate ended at 5.45-5.65 per cent as against 5.5-5.7 per cent on Monday.

Today, banks borrowed Rs 62,685 crore through the twin repo tenders. They parked Rs 150 crore at the RBI’s reverse repo tender today.