Bonds drop most in a month as factory output quickens

The 10-year bonds fell the most in more than a month as industrial production exceeded economists' estimates, fuelling concern the central bank will raise interest rates at a policy review this week.

Yields rose to the highest level in a week after factory output climbed 13.8 per cent from a year earlier in July, compared with 5.8 per cent the previous month, the statistics office said on September 10. The Reserve Bank of India has increased policy rates four times this year to curb inflation, which has been around 10 percent since February. The next review is on September 16.

 

The yield on the 7.80 per cent note due May 2020 advanced seven basis points to 7.98 per cent, the highest level since September 6, as of the 5:00 pm close in Mumbai, according to the central bank's trading system. The price dropped 0.43, or 43 paise per 100 rupee face amount, to 98.83. Markets were closed on September 10 for a holiday.

Rupee rises a third day
The rupee advanced a third day after the government reported a bigger pickup in factory output than economists forecast, spurring demand for local assets. The rupee appreciated 0.2 per cent to 46.40 per dollar as of the 5 pm close in Mumbai, according to data compiled by Bloomberg. It earlier touched 46.245, the strongest level since August 10. The Indian currency may trade between 46.10 and 46.50 this week, Raghuvanshi predicted.