India’s 10-year bonds rose, snapping a two-day decline, on speculation the central bank will temper the pace of interest-rate increases after the Federal Reserve cut its growth forecast and China’s economy slowed. Yields have climbed six basis points since the Reserve Bank of India raised borrowing costs for a third time this year on July 2 to ease rising wholesale prices. Policy makers may lift benchmark rates another quarter-percentage point and then stop as doubts about the strength of a global economic rebound remain, according to state-owned Corporation Bank. “Investors have already factored in a 25 basis-point increase in policy rates this month to curb inflation but the central bank may refrain from aggressive moves on concerns about a global recovery,” said S. Srikumar, a fixed-income trader at Corporation Bank in Mumbai. The yield on the 7.80 percent note due May 2020 fell two basis points, or 0.02 percentage point, to 7.61 percent as of 9:45 a.m. in Mumbai, according to the central bank’s trading system. The price rose 0.11, or 11 paise per 100 rupee face amount, to 101.25. The Reserve Bank on July 2 increased the reverse-repurchase rate to 4 percent from 3.75 percent and the repurchase rate to 5.5 percent from 5.25 percent. The next policy meeting is set for July 27. The Federal Reserve lowered its 2010 forecast for economic growth to a range of 3 percent to 3.5 percent from 3.2-3.7 percent previously. China’s expansion eased to 10.3 percent in the second quarter from 11.9 percent in the January-March period, the government reported today. One-year interest-rate swaps in India, derivative contracts used to guard against fluctuations in borrowing costs, decreased. The fixed payment made to receive a floating rate fell one basis point to 5.65 percent. To contact the reporter on this story: V. Ramakrishnan in Mumbai at rvenkatarama@bloomberg.net

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