India 10-year bond logs week's best day on hopes of gov't support

MUMBAI: India’s 10-year bond logged its best day in more than a week on Thursday as traders covered short positions after reports that New Delhi was weighing steps to boost foreign inflows, while a U.S.-China meeting raised hopes of ending the Iran war.

The benchmark 6.48% 2035 bond yield settled down at 7.0203%, snapping a five-day gaining streak and marking its biggest fall in a week. It had closed at 7.0493% on Wednesday.

Bloomberg News reported on Thursday that India is considering a sharp cut in taxes paid by foreign investors on domestic bonds, as authorities seek to align policies with global norms and attract inflows.

The finance ministry is seriously considering the move, recommended by the Reserve Bank of India, as authorities seek to curb the rupee’s depreciation, the report said.

Traders have grown wary of a weakening rupee, which has slid more than 5% since the Iran war began on February 28 and hit a record low of 95.9575 per U.S. dollar.

“The ongoing West Asia crisis and severe FII outflows from domestic equities have created a persistent depreciation bias on our currency,” said Arun Srinivasan, chief of fixed income at ICICI Prudential Life.

Globally, traders watched U.S. President Donald Trump’s meeting with China’s Xi Jinping, at the start of a two-day trade summit.

Brent crude futures eased slightly in Asian trade to $105.49 a barrel, which also aided sentiment.

Separately, India’s wholesale price index spiked to 8.3% in April from 3.9% in March, much higher than the market expectation of 5%-plus, which traders feared could pass through to consumer prices in the coming months.

Rates

Overnight index swaps also eased. The one-year swap was steady at 6.09%, while the two-year fell 2.25 bps to 6.2725%.

The five-year rate was down 5.5 bps at 6.6075%.