MUMBAI: Government bonds rose to their highest in more than 2-1/2 months on Wednesday as a sharp easing of headline inflation cemented bets the central bank will keep interest rates on hold at its policy review later this month.
Data on Wednesday showed headline inflation eased to a five-month low of 6.16 per cent in December, helped by a softening in vegetable prices.
The drop in wholesale inflation came on the back of a fall in retail inflation to a three-month low, reinforcing expectations that the Reserve Bank of India will hold interest rates for a second consecutive month on Jan. 28.
Foreign funds have turned large buyers of Indian debt, purchasing nearly $2 billion in the four sessions to Monday. Of this, they bought $860 million on Monday, data from the Securities and Exchange Board of India showed.
After raising interest rates by 50 basis points over September and October, RBI Governor Raghuram Rajan held rates steady last month, saying inflation data would largely...
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