Bonds rise as high yield draws funds

The 10-year bonds rose, snapping a five-day slide, as yields near the highest level in 16 months attracted investors.

Banks and securities companies might increase purchases of the debt as central and state governments hadn’t scheduled bond sales in the remainder of February, said Arvind Sampath, head of interest-rate trading at Standard Chartered Bank Plc in Mumbai. The yield on the benchmark note yesterday reached the highest level since October 2008 after inflation accelerated to a 15-month high in January.

“Yield levels look good for investors to re-enter the bond market, as there’s no immediate debt supply scheduled,” Sampath said. “All the negative data that was due, including inflation, was now out of the way.”

The yield on the 6.35 per cent note due January 2020 fell one basis point to 7.87 per cent as of the 5:30 pm close in Mumbai, according to the central bank’s trading system. A basis point is 0.01 percentage point. The price rose 0.07 per cent, or 7 paise per Rs 100 face amount, to Rs 89.72.

The wholesale price index, measuring prices of rice, oil and manufactured products, climbed 8.56 per cent last month from a year earlier, following a 7.31 per cent gain in December, the commerce ministry said yesterday.

Foreign holdings
Foreign investment in Indian government and corporate debt reached a record $10 billion on February 10, according to data from the Securities and Exchange Board of India. The South Asian nation has capped overseas ownership of government securities at $5 billion and that of corporate bonds at $15 billion.

Re rises on divestment hopes
The rupee strengthened to the strongest level in more than a week on optimism the government will unveil plans to spur investment and economic growth in its budget due to be released on February 26.

The currency advanced for a fifth day, the longest winning streak since October, after the benchmark Bombay Stock Exchange’s Sensitive Index climbed 1.2 per cent and the MSCI Asia Pacific Index of regional shares added 0.5 per cent. The government might accelerate sales of state-owned companies in the fiscal year starting April 1.