By Anil Varma Oct. 23 (Bloomberg) -- India's 10-year bonds rose, pushing yields to a seven-month low, on speculation slowing inflation and economic growth will increase pressure on the central bank to add to the interest-rate cut announced this week. Benchmark notes gained after a government report showed the nation's inflation rate dropped to the lowest in more than four months. A slide in the prices of commodities, led by crude oil, added to speculation inflation will slow further. The Reserve Bank of India, which lowered its benchmark repurchase rate for the first time since 2004 on Oct. 20, is scheduled to review monetary policy at a quarterly meeting in Mumbai tomorrow. ``The overall trend in interest rates appears to be downward, given falling inflation and commodity prices and slowing growth,'' said Pradeep Madhav, chief operating officer in Mumbai at Securities Trading Corp. of India, a primary dealer that underwrites government debt sales. ``Bond yields have softened this week on these factors.'' The yield on the 8.24 percent note due April 2018 fell 4 basis points to 7.56 percent at the 5:30 p.m. close in Mumbai, according to the central bank's trading system. The price rose 0.29 per 100 rupee face amount to 104.54. A basis point is 0.01 percentage point. Wholesale prices in India rose 11.07 percent in the week to Oct. 11 from a year earlier after gaining 11.44 percent in the previous such period, the commerce ministry said in a statement in New Delhi today. That is the least since the week ended May 31. Economists had expected an 11.35 percent increase. Inflation erodes the value of the fixed payments from bonds. Commodities Fall Crude oil in New York fell yesterday to a 16-month low of $66.75 per barrel. The commodity has slid more than 46 percent from a record high reached in July. The UBS Bloomberg Constant Maturity Commodity Index of 26 raw materials has declined more than 43 percent from a July peak. The Reserve Bank reduced its overnight lending rate by 1 percentage point to 8 percent on Oct. 20. India's industrial production grew at the weakest pace on record in August, a government report showed Oct. 10. Output at factories, utilities and mines rose 1.3 percent in August from a year earlier after a revised 7.4 percent gain in July, according to the Central Statistical Organization. The cost of five-year interest-rate swaps, or derivative contracts used to guard against rate fluctuations, dropped. The rate, a fixed payment made to receive floating rates, slipped to 6.675 percent from 6.8 percent yesterday. To contact the reporter on this story: Anil Varma in Mumbai at avarma3@bloomberg.net.

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