Easing India inflation reprieve for Asia's worst bond market

India’s inflation rate dropped below 5 percent for the first time in three months, giving the central bank room to keep interest rates on hold for longer while providing relief to battered bond investors. Government data on Monday showed inflation at 4.44 percent in February, lower than the 5.07 percent pace in January and below the 4.7 percent estimate of economists polled by Bloomberg News.

The easing for the second straight month offers bond investors in India -- the worst performing market among major Asian economies -- something of a temporary cheer. The benchmark 10-year bond yield fell three basis points to 7.60 percent.

“The sharp dip in retail inflation has reinforced our expectation that the MPC would keep the repo rate unchanged in the upcoming policy review in April, which may prompt a further easing of bond yields in the immediate term,” Aditi Nayar, economist at ICRA LtdBSE -1.22 %. said referring to the central bank’s Monetary Policy Committee that’s scheduled to meet April 4-5.