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Gilts plunge as inflation concerns make a comeback in RBI policy
The RBI kept rates unchanged at its mid-quarter policy review and stated that upside risks
to inflation would dictate the initiation of the rate cut cycle and the FY13 rate cycle
trajectory. The reaction to the RBI commentary on inflation was quite negative as yields
jumped by 8-10 bps. The market seems to be worried on two fronts: inflation posing a
threat to early rate cuts and lack of bold measures in the Budget.
The 10-Y G-Sec closed higher at 8.36% vs the previous close of 8.28%. An in-line budget
can help calm the sentiment and reverse the recent losses – however movement from
there on is likely to be range-bound with a close eye on the inflation risks that the RBI has
underlined today.
The OIS rates moved along the lines of the domestic yields, showing exaggerated
movement on account of inflationary concerns at home. The 1Y OIS ended at 8.17-8.23%
vs 8.03-8.09% while the 5-Y swap ended at 7.56-7.62% vs 7.47-7.53%.
Non-SLR Market
Allahabad Bank placed 3M CD worth INR 5bn @ 11.20%. SBT placed same tenor @ 11.15%
for INR 1bn. Andhra Bank placed 1Y CD worth INR 2.50bn @ 10.58%.
Money Market
The LAF borrowing was at INR 1.35tn which could have been even worse on account of the
advance-tax outflow, if it not had been for the surprise CRR cut last week. Overnight call
WAR was largely unchanged at 8.90% vs 8.89%.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Gilts plunge as inflation concerns make a comeback in RBI policy
The RBI kept rates unchanged at its mid-quarter policy review and stated that upside risks
to inflation would dictate the initiation of the rate cut cycle and the FY13 rate cycle
trajectory. The reaction to the RBI commentary on inflation was quite negative as yields
jumped by 8-10 bps. The market seems to be worried on two fronts: inflation posing a
threat to early rate cuts and lack of bold measures in the Budget.
The 10-Y G-Sec closed higher at 8.36% vs the previous close of 8.28%. An in-line budget
can help calm the sentiment and reverse the recent losses – however movement from
there on is likely to be range-bound with a close eye on the inflation risks that the RBI has
underlined today.
The OIS rates moved along the lines of the domestic yields, showing exaggerated
movement on account of inflationary concerns at home. The 1Y OIS ended at 8.17-8.23%
vs 8.03-8.09% while the 5-Y swap ended at 7.56-7.62% vs 7.47-7.53%.
Non-SLR Market
Allahabad Bank placed 3M CD worth INR 5bn @ 11.20%. SBT placed same tenor @ 11.15%
for INR 1bn. Andhra Bank placed 1Y CD worth INR 2.50bn @ 10.58%.
Money Market
The LAF borrowing was at INR 1.35tn which could have been even worse on account of the
advance-tax outflow, if it not had been for the surprise CRR cut last week. Overnight call
WAR was largely unchanged at 8.90% vs 8.89%.
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