India’s Bonds Advance as One-Month High Yields Attract Buyers

May 13 (Bloomberg) -- India’s benchmark 10-year bonds gained on speculation banks and investors will put spare cash into debt after their yield yesterday reached a one-month high.

Benchmark bonds gained by the most in a week as subscriptions at the Reserve Bank of India’s daily reverse- repurchase auction, a gauge of surplus money in the financial system, averaged a record 1.4 trillion rupees ($28.2 billion) a day this month, compared with 1.1 trillion rupees in April. India’s five-phase general election ended today, with counting set for May 16.

“Liquidity support and the fact that there aren’t fresh factors to be concerned about are making present levels attractive,” said s. srikumar, chief of fixed-income at state- owned Corporation Bank in Mumbai.

The yield on the 6.05 percent note due February 2019 fell nine basis points to 6.33 percent at the 5:30 p.m. in Mumbai, according to the central bank’s trading system. The price rose 0.61, or 61 paise per 100-rupee face amount, to 98.01.

Bonds pared gains before the government’s scheduled sale tomorrow of 120 billion rupees of debt, the second this month. India plans to raise a record 2.41 trillion rupees from bond sales in the six months ending Sept. 30 as it increases spending to revive growth in Asia’s third-largest economy.

Elections

As many as 714 million voters began casting their ballots five weeks ago in the world’s largest democracy. Exit polls showed neither the ruling Indian National Congress party nor the main opposition Bharatiya Janata Party garnered enough votes to form a government without the support of regional parties.

The Congress party-led United Progressive Alliance may win 199 seats in elections to India’s 545-seat lower house, or Lok Sabha, a poll by the NewsX television channel showed. The BJP- led National Democratic Alliance may get 191 seats, it said. The majority mark is 272 as two seats in the house are nominated by the president.

The cost of five-year swaps, or derivative contracts used to guard against rate fluctuations, declined. The rate, a fixed payment made to receive floating rates, slipped to 5.73 percent compared with 5.78 percent yesterday.