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RBI hikes policy rates by 25bps; inflation target revised to 8% for March-11
Government securities
RBI continued with its calibrated approach towards the normalization of policy
rates raising the Repo and Reverse Repo rate by 25bps to 6.75% and 5.75%
respectively. It also expressed concerns about the shift in the drivers of inflation to
the non food manufactured products and revised its inflation target for FY11 to 8%
from the earlier target of 7%. The cash reserve ratio (CRR) of scheduled banks has
also been retained at 6.0% of net demand and time liabilities (NDTL). Yields
remained largely range bound since the policy rate hike was in line with
expectation however there was an upward pressure due to a second revision in the
inflation target for March-11.
Swap rates rose across maturities as revision in the inflation raised possibility of
another rate hike by RBI (at its next review) to maintain its anti inflationary
stance. The one year swap closed 5bps higher at 7.42% while the five year swap
ended at 7.92%, 4bps higher than previous close.
Non-SLR market
Rates on the short term money market instruments declined 5-8bps despite
increase in the policy rates. Three month CDs were dealt at 9.70%-9.75% while
one year CDs were dealt at 9.90%-9.95%. State Bank of India placed INR 10bn of
24th Jun maturity CD at 9.70% while Andhra Bank placed INR 9bn of similar
maturity CD between 9.75%-9.83%. Vijaya Bank placed INR 6.35bn of one year
CD at 10% and OBC placed INR 1.50bn of one year CD at 9.96%.
Money markets
Banks borrowed INR 1.45trn at the first LAF prior to the policy in anticipation of an
increase the repo rate. At the second LAF the borrowing was only INR 6.30bn.
Banks have maintained a more aggressively skewed borrowing at the LAF window
in this fortnight with the excess CRR touching 9% above the requirement on 14th
March (INR 290bn in absolute terms).
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
RBI hikes policy rates by 25bps; inflation target revised to 8% for March-11
Government securities
RBI continued with its calibrated approach towards the normalization of policy
rates raising the Repo and Reverse Repo rate by 25bps to 6.75% and 5.75%
respectively. It also expressed concerns about the shift in the drivers of inflation to
the non food manufactured products and revised its inflation target for FY11 to 8%
from the earlier target of 7%. The cash reserve ratio (CRR) of scheduled banks has
also been retained at 6.0% of net demand and time liabilities (NDTL). Yields
remained largely range bound since the policy rate hike was in line with
expectation however there was an upward pressure due to a second revision in the
inflation target for March-11.
Swap rates rose across maturities as revision in the inflation raised possibility of
another rate hike by RBI (at its next review) to maintain its anti inflationary
stance. The one year swap closed 5bps higher at 7.42% while the five year swap
ended at 7.92%, 4bps higher than previous close.
Non-SLR market
Rates on the short term money market instruments declined 5-8bps despite
increase in the policy rates. Three month CDs were dealt at 9.70%-9.75% while
one year CDs were dealt at 9.90%-9.95%. State Bank of India placed INR 10bn of
24th Jun maturity CD at 9.70% while Andhra Bank placed INR 9bn of similar
maturity CD between 9.75%-9.83%. Vijaya Bank placed INR 6.35bn of one year
CD at 10% and OBC placed INR 1.50bn of one year CD at 9.96%.
Money markets
Banks borrowed INR 1.45trn at the first LAF prior to the policy in anticipation of an
increase the repo rate. At the second LAF the borrowing was only INR 6.30bn.
Banks have maintained a more aggressively skewed borrowing at the LAF window
in this fortnight with the excess CRR touching 9% above the requirement on 14th
March (INR 290bn in absolute terms).
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