Bond market sees rate cuts even as RBI talks tough on inflation
The rally in Indian bonds is providing the Reserve Bank of India (RBI) governor Raghuram Rajan an unexpected gift: Falling borrowing costs are starting to provide the benefits of lower interest rates without him actually having to ease monetary policy.
The bond rally - and the lower yields that result, comes as the consumer price index eased to 6.46% in September. That was the lowest since the series was introduced in January 2012 - a major morale boost for the fixed-income market and its legendary fear of inflation. Investors are also more confident on the economy after a sharp turnaround in the rupee, the best Asian performer so far in 2014, gaining about 0.7% to 61.53 to the dollar, and bucking a falling trend among its peers.
Despite no change in interest rates, India’s largest lender, State Bank of India, last week became....
