India’s 10-Year Bond Yield at 3-Year High on Inflation Concern.

India’s 10-year bonds were little changed, with yields at a three-year high, on concern a potential increase in local fuel prices will spur inflation.

Gasoline in India may have to be raised by 1.82 rupees a liter in New Delhi, B. Mukherjee, director of finance at Hindustan Petroleum Corp., said today. State-owned Indian Oil Corp. is losing 1.52 rupees on every liter of the fuel it sells, Finance Director P.K. Goyal said by telephone today, declining to comment on whether prices will rise.

“These aren’t happy times for bond investors,” said Ganti N. Murthy, head of fixed income in Mumbai at Peerless Mutual Fund. “Inflation pressures will damp sentiment further.”

The yield on the 7.8 percent securities due April 2021 was 8.95 percent as of 9:45 a.m. in Mumbai, the highest level for a benchmark 10-year note since August 2008, according to the central bank’s trading system. The rate may climb to 9.25 percent over the next two months, Murthy said.

Global oil prices rose 18 percent last month in New York, the biggest increase since May 2009, according to data compiled by Bloomberg. The commodity has dropped 1.8 percent in the past two days. India imports about 80 percent of its annual crude requirement.

The wholesale-price index, India’s key measure of inflation, rose 9.72 percent in September from a year earlier, official data show. The gauge has held above 9 percent for 10 months.

Source : bloomberg.com