Fixed Income Report: Credit Policy tuesday likely unsatisfactory

It just hit me that with the fixed Income markets moving so tenuously, the yields of 8.44% ruling on 10?Y today will likely be wiped out within 2 weeks of the trading after a 25 bp rate cut, as markets also expect yields to go back to even 9% and RBI unlikely to follow up with OMOs so diligently after the rate cut.

The Rupee fortunately has a lot of head room in the new range , coming in to policy week at above 51, with March GDP likely to stay near 6% than 6.9%

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One thought on “Fixed Income Report: Credit Policy tuesday likely unsatisfactory

  1. Each issue of fresh debt by the GOI erodes the creditworthiness of the nation’s borrowing capacity. The 10s were in the late 7% mark last year have been inching higher. The RBI is trying to reduce the borrowing cost of the Government. Remember Government borrowings are inelastic to the borrowing cost since a borrowing target is decided in the beginning of the year. It just makes sense for the RBI not to do OMOs to try and reduce the GOI yields on the 10s. Letting the market determine the yields on the 10s will just bankrupt the country faster instead of kicking the can down the road which ultimately is a good thing since we can start afresh.

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