MPC Leaves Repo Rate Unchanged; CRR To Be Normalised In Two Phases

Accommodative Stance Would Continue Well Into Next Year, Says RBI Governor

  • Have previously stated that accommodative stance would continue well into next year
  • Never spelt out June as the date when this guidance would end
  • Variable rate reverse repo auctions part of our toolkit
  • Overall liquidity remains the same, certain portion is taken within the 14 day reverse repo window

Bonds In India Sell Off As RBI’s Support Measures Disappoint

Indian sovereign bonds declined as the Reserve Bank of India’s measures to support the bond market fell short of expectations. The yield on benchmark 10-year note rose four basis points to 6.11% after climbing to 6.15%, its highest since Aug. 28. Governor Shaktikanta Das refrained from announcing a bond purchase calendar to help the market absorb the government’s massive borrowing plan, though he assured that the central bank’s liquidity stance will continue to be accommodative.

Is the bond market a safe investment?

RBI’s reluctance to announce concrete steps to support the bond market could exacerbate a selloff triggered by the government’s plan to sell 12 trillion rupees ($164 billion) of bonds in the next fiscal year starting April, which comes after a record 13.9 trillion rupees of issuance this year.

“The RBI not coming out with open-market purchases disappointed market participants given that there were huge expectations,” said Naveen Singh, head of fixed-income trading at ICICI Securities Primary Dealership in Mumbai. The more RBI delays support, higher the yields will move, he said.

MPC Leaves Repo Rate Unchanged; CRR To Be Normalised In Two Phases via @goldsilverrepor
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