Fixed Income yields keep falling off a cliff while liquidity is managed with the year long rally in yields chopped
below 9% even as emergency liquidity’s few dollars keep bonds from staying east of the channel corridor mandated by RBI with the marginal lending facility currently at 9% for banks.
The drop in yields could not however encourage RBI to force rate cuts sooner as these yields remain in a thinly traded market and neither borrowing costs nor lending rates for retail or wholesale tranches are nearly being effected apart from Treaasury gains ahead of March 31
RBI has been allowing the use of excess SLR for the MLF (MSF) emergency window since the last 3-4 weeks leading to the unwitting capital appreciation in bonds since November.
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