New Delhi: India’s central bank, the most aggressive among its Asian peers in slashing borrowing costs in 2019, may be done with easing, swap markets show.

One-year interest-rate swaps surged 27 basis points to a four-month high of 5.29 per cent on December 6 after the Reserve Bank of India shocked the market by keeping rates unchanged after cutting five times this year. Swaps, which were pricing in 25-40 basis points of reductions before the policy decision, are signalling a pause, according to DBS Bank Ltd.

“The market is a bit taken aback by the RBI’s shock hold and that’s getting reflected in the swaps pricing-out any more rate cuts,” said Eugene Leow, a fixed-income strategist in DBS Bank in Singapore. “Market participants are now focusing on inflationary pressures and fiscal slippage.”

The yield on 10-year bonds surged 20 basis points over Thursday and Friday after the RBI raised its inflation forecast. It rose 4 basis points to 6.71 per cent on Tuesday, while the one-year interest-rate swaps surged to 5.30 per cent.

Consumer price index probably rose 5.26 per cent in November from a 4.6 per cent gain in October, according to a Bloomberg survey before data due Thursday.

Besides vanishing rate-cut support, volatile oil prices and higher US Treasury yields will weigh on Indian bonds, according to ICICI Securities Primary Dealership Ltd. The absence of bond purchases by the RBI and speculation that the authority may be selling short-end bonds has also dented sentiment.

“Every incremental news coming in is bond-negative,” said Naveen Singh, head of fixed-income trading in Mumbai at ICICI Securities. “Either we are in a very long pause, or over a period of time if we see any green shoots, the market may even start to price in the possibility of rate hikes in the second half of 2020.”