India’s one-year interest-rate swaps slid to the lowest in more than two years on speculation softening inflation will spur the central bank to cut borrowing costs for a third time this year.
Gains in benchmark wholesale prices slowed to 6.27 percent in March, the smallest increase in 40 months, according to a Bloomberg News survey before data due today. The Reserve Bank of India has lowered its benchmark repurchase rate by 50 basis points to 7.5 percent in two reductions this year. The next policy review is due May 3.
The one-year swap, a derivative contract used to guard against fluctuations in funding costs, fell two basis points to 7.36 percent as of 9:25 a.m., data compiled by Bloomberg show. That’s the lowest level since March 15, 2011.
“The drop in short-end swaps reflects increased rate cut expectations,” said Nagaraj Kulkarni, a Singapore-based strategist at Standard Chartered Plc. “The recent drop in global crude-oil prices also supports such expectations.”
Brent crude has retreated 17 percent from this year’s high of $118.90 a barrel touched in February. India imports about 80 percent of its oil. Consumer prices rose 10.39 percent in March, compared with 10.91 percent in February, official data showed on April 12.
The yield on the 8.15 percent government bonds due June 2022 fell two basis points, or 0.02 percentage point, to 7.85 percent, according to the central bank’s trading system.
Source: http://www.businessweek.com/news/2013-04-15/india-s-swap-rate-drops-to-25-month-low-on-rate-cut-speculation
Gains in benchmark wholesale prices slowed to 6.27 percent in March, the smallest increase in 40 months, according to a Bloomberg News survey before data due today. The Reserve Bank of India has lowered its benchmark repurchase rate by 50 basis points to 7.5 percent in two reductions this year. The next policy review is due May 3.
The one-year swap, a derivative contract used to guard against fluctuations in funding costs, fell two basis points to 7.36 percent as of 9:25 a.m., data compiled by Bloomberg show. That’s the lowest level since March 15, 2011.
“The drop in short-end swaps reflects increased rate cut expectations,” said Nagaraj Kulkarni, a Singapore-based strategist at Standard Chartered Plc. “The recent drop in global crude-oil prices also supports such expectations.”
Brent crude has retreated 17 percent from this year’s high of $118.90 a barrel touched in February. India imports about 80 percent of its oil. Consumer prices rose 10.39 percent in March, compared with 10.91 percent in February, official data showed on April 12.
The yield on the 8.15 percent government bonds due June 2022 fell two basis points, or 0.02 percentage point, to 7.85 percent, according to the central bank’s trading system.
Source: http://www.businessweek.com/news/2013-04-15/india-s-swap-rate-drops-to-25-month-low-on-rate-cut-speculation
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