* 10-year bond yield ends 2 bps lower at 7.80 pct
* 1-yr swap rate hits 27-mnth low on hopes of deeper rate cut
* Rate cut outlook for CY doubled to 100 bps - Bajaj Alliance Insurance
* India to sell 150 bln rupees in bonds on Thursday
By Archana Narayanan
MUMBAI, April 17 (Reuters) - India's 10-year bonds gained for a fourth day and swap rates fell to a 27-month low on hopes that slowing inflation and a sell-off in commodities would spur the central bank to cut interest rates for a third time this year.
Recent data supporting the case for easier monetary policy - including lower wholesale and retail inflation and languishing industrial output - has raised the odds the Reserve Bank of India would cut interest rates at its May 3 plicy review.
A slump in commodities prices has also raised those hopes. Brent crude slid towards $99 per barrel on Wednesday while gold on Tuesday hit its two-year low, which is expected to reduce India's import bills and ease pressures on the current account deficit (CAD).
The CAD could ease to around 3 percent in the current fiscal year from prior estimates of about 4 percent due to sharp drop in global commodity prices, two analysts said on Wednesday.
"Sharp fall in crude and gold prices, if sustained, will put India in a sweet spot as it will improve the CAD and inflation situation dramatically giving RBI the room to cut rates sooner and deeper," said Naveen Sharma, Fund Manager, Bajaj Allianz Life Insurance.
Sharma has doubled his rate cut outlook for rest of the calendar year to 100 bps.
The 10-year bond yield ended down 2 basis point at 7.80 percent. The yield had slid to a low of 7.79 percent earlier in the session, a level last seen on Feb. 28.
Mild profit-taking and government's plan to sell 150 billion rupees in debt on Thursday capped the rise in bond prices.
India will sell 60 billion rupees of the 10-year benchmark 8.15 percent, 2022 bonds, 30 billion rupees each of the 8.12 percent, 2020 bonds, 8.32 percent, 2032 bonds, and 8.30 percent, 2042 bonds in this week's debt sale.
The one-year overnight interest swap (OIS) fell to a session low of 7.25 percent, its lowest since Jan. 11, 2011. It closed at 7.27 percent from its previous close of 7.31 percent.
The benchmark five-year swap rate fell to 6.98 percent, its lowest since Oct. 30, 2012. It closed at 7.00 percent from 7.06 percent on Tuesday. (Editing by Bijoy Koyitty)