Bonds rise as investors seek safety

Ten-year bonds rose the most in more than three weeks, paring a monthly loss, on speculation investors will opt for the safety of debt as signs the global economic recovery is faltering reduces the allure of shares.

Yields on benchmark debt trimmed this month’s increase to 13 basis points, after a report showed personal income in the US rose less than economists predicted. The Reserve Bank of India (RBI) has raised interest rates four times this year to cool inflation. The South Asian nation’s economy expanded last quarter at the fastest pace since 2007, the government said today.

The yield on the 7.8 per cent note due May 2020 fell six basis points, the most since August 6, to 7.93 per cent at the 5 pm close in Mumbai, according to the central bank’s trading system. The price rose 0.39 per cent, or 39 paise per '100 face amount, to '99.11.

Rupee completes worst month since May
The rupee fell, completing its worst month since May, on concern a stalling global recovery will crimp overseas shipments from Asia’s third-largest economy and cause the trade deficit to widen further.

The rupee declined 1.4 per cent this month, and 0.3 per cent from yesterday, to 47.1 per dollar as of the 5 pm close in Mumbai. The currency has dropped 1.2 per cent this year, the worst performance among Asia’s most-actively traded currencies with the exception of South Korea’s won.

Offshore forward contracts indicate the rupee will trade at 47.71 to the dollar in three months, compared with expectations for a level of 47.6 yesterday and 47.08 at the end of last month.