Investors should employ a so-called “butterfly” swap strategy in India to profit from higher borrowing costs as a recovery in Asia’s third-largest economy stokes inflation, according to Morgan Stanley.
India’s 10-year bonds advanced, with the yield near a two-week low, on speculation inflation will ease and stave off the risk of the central bank raising interest rates for the third time in less than four months.
India’s bonds due 2022 rose, sending the benchmark yield to the lowest in almost three years, on optimism cooling inflation will allow the central bank to add to this year’s three interest-rate cuts. The rupee weakened.
Malaysian Prime Minister Najib Razak’s promise of measures to curb the budget gap and avert a credit-rating downgrade helped send three-year government bond yields to a four-month low. His resolve is about to be tested.
Malaysia’s three-year government bonds are having the best week since January as speculation the U.S. will delay paring stimulus beyond 2013 fueled demand for emerging-market assets. The ringgit gained for a third week.
India’s rupee advanced the most this month after the central bank raised two interest rates to support the currency, which sank to a record this month. Bonds plunged the most since 2009 and stocks fell.