The yield on the 6.35% note due January 2020 fell one basis point to 7.85%. The rupee strengthened to 45.5940 per dollar as of the close in Mumbai, from 45.605 on Monday. Monday?s closing price was the currency?s weakest level since March 15.
India?s 10-year bonds advanced after central bank governor Duvvuri Subbarao said the inflation rate, which touched a 16-month high in February, should start to moderate by July.
India?s rupee halted a three-day decline on speculation exporters may sell dollars to take advantage of the currency?s drop on Monday to its lowest level in a week.
The currency advanced in tandem with the stocks as investors bet the central bank?s decision to increase key interest rates by 25 basis points on March 19 will help curb inflation and sustain economic growth. EM Capital Management LLC, which beat 96% of 420 Indian equity funds over the past year, said spending by a burgeoning middle class will limit the effect of higher borrowing costs on share prices.
?Given the momentum in the economy, these are good levels for exporters to sell dollars,? said Sudarshan Bhatt, chief currency trader at state-owned Corporation Bank in Mumbai. ?Monetary tightening is also helping the rupee.?