Fixed Income And Currency Market
USD posted steep loss as inflation came below expectations
Synopsis: The USD weakened as disappointing economic data suggested the Federal Reserve may not raise rates. US inflation eased to 3.2%, while falling oil prices boosted the INR, despite stable food inflation in India.
Dated 20 Nov 2023
By Ketan Verma
RBI’s possible OMO sales will cause system liquidity to fall further-Liquidity Cheat SheetOct 23
System liquidity stood at Rs 178 billion of deficit level as of 19th Oct 2023. Liquidity absorption through Reverse Repo and SDF stood at Rs 574 billion as of 19th Oct 2023.
Dated 23 Oct 2023
By Subhasis Mishra
RBI likely to maintain status quo on policy repo rate in upcoming policy meeting
The central bank is expected to keep the repo rate at current level in the wake of both global and domestic factors. Domestic inflation softened in August which is expected to follow a downtrend which provides relief to RBI.
Dated 2 Oct 2023
By Subhasis Mishra
Union Government to Borrow Rs 6550 billion during H2FY24
Union Government has notified to borrow Rs 6550 billion during H2FY24. An ultra-long term paper of 50 years maturity has been introduced for the first time.Moreover, Rs 200 billion will be borrowed by Sovereign Green Bonds.
Dated 27 Sept 2023
By Subhasis Mishra
How long will yield curve inversion sustain?
The g-sec yield curve is flat to inverted and has been so for a while now. Banks, the largest holders of g-secs, are finding that they are earning negative returns from g-sec investments as their borrowing costs are high with deposit rates at over 7.5%. How long can this last?
Dated 11 Sept 2023
By Arjun Parthasarathy
G-sec yields have come off after an upward correction
G-sec yield has declined since the last two weeks after an upward correction. It is expected that domestic inflation will soften from this month. System liquidity also regained surplus level. Going ahead, inflation and US Fed policy outcomes will guide g-sec yield movement.
Dated 4 Sept 2023
By Subhasis Mishra
USD strengthens amid Powell's cautionary remarks on inflation and rates
Synopsis: Federal Reserve Chair Jerome Powell's speech in Wyoming signalled potential interest rate hikes to curb inflation, boosting USD against major currencies. Weakest US business growth noted as INR faced USD pressure.
Dated 28 Aug 2023
By Ketan Verma
G-sec yield to witness uptrend driven by rise in inflation and US Fed hawkish stance
Rise in domestic inflation and indication of rate hike by US FOMC have ignited g-sec yield to rise. In this scenario, 25 bps rate hike by RBI in next policy meeting cannot be ruled out.
Dated 21 Aug 2023
By Subhasis Mishra
USD Rises on Inflation Data, Fed Outlook; China Trade Disappoints
USD ended higher as inflation data lowered rate cut expectations. US CPI rose to 3.2%. Fed officials differed on rates, Powell focused on upcoming data. Chinese trade data disappointed with significant export and import declines.
Dated 14 Aug 2023
By Ketan Verma
RBI may raise repo rate by 25 bps rate
Owing to higher vegetable prices, inflation is expected to rise. Globally, central banks continue to hike rates. All these factors may prompt the central bank to raise policy repo rate by 25 bps with an end to rate hike cycle.
Dated 7 Aug 2023
By Subhasis Mishra
G-sec yield to exhibit range bound movement in near future
G-sec yield is expected to remain range bound driven by US Fed rate hike for a short period.
Dated 24 Jul 2023
By Arjun Parthasarathy
Domestic g-sec yields have seen lows on hawkish global central banks
Owing to statements by the US Fed chairman of possible rate hikes ahead and by rate hikes by the ECB, US and global bond yields have seen sharp movement upwards which has caused domestic gilt yields to rise from lows.
Dated 3 Jul 2023
By Subhasis Mishra
Fall in inflation will keep g-sec yield subdued
In the current scenario of falling inflation, g-sec yield is likely to remain subdued in a range bound manner as the central bank to hold current repo rate levels. The Rupee has also strengthened on the backdrop of falling inflation.
Dated 19 Jun 2023
By Subhasis Mishra
Indian Rupee remains stable following RBI policy outcomes
Indian rupee exchange rate against USD remained stable on weekly basis after RBI’s decision to maintain status quo policy repo rate. Rupee got support as RBI MPC has decided to remain focused on withdrawal of accommodation to control inflation.
Dated 12 Jun 2023
By Subhasis Mishra
All factors that are likely to impact government bond yield in next two months
Owing to falling consumer inflation and global factors, RBI has continued with the current policy rate. System liquidity has stood in a comfortable position. The g-sec yield curve is expected to exhibit flat to inversion in coming days.
Dated 12 Jun 2023
By Subhasis Mishra
Growth, fiscal deficit and inflation dynamics favour an extended pause in rates
Domestic GDP growth rate stood at 7.2% for FY23 while fiscal deficit has met budgeted target for last fiscal year. Considering these factors and inflation dynamics favour an extended pause in policy repo rates going ahead.
Dated 5 Jun 2023
By Subhasis Mishra
Yield curve will start to steepen from its current flatness
Driven by ease in system liquidity, RBI’s pause in rate hike and fall in inflation, the decline in short term yield is higher as compared to that of long- term papers which has made the yield curve to steepen.
Dated 21 May 2023
By Subhasis Mishra
INR Weakens, USD Gains Amid Cooling Inflation and Job Market
INR weakened on declining Indian retail inflation. USD gained despite cooling inflation and job market. US consumer price index eased to 4.9%, below forecasts. Consumer sentiment in the US dropped. Fed raised rates recently.
Dated 15 May 2023
By Ketan Verma
Narrowest Fed fund to Repo spread may be positive for g-sec yields
Declining spread between RBI repo rate and Fed fund rate may even prompt inflows of US Dollar.
Dated 8 May 2023
By Arjun Parthasarathy
Inflation and liquidity to bring down short end yields
Short end yields to trend down on easing consumer inflation and high surplus liquidity
Dated 16 Apr 2023
By Subhasis Mishra
Will 10-yr G-sec go to 8%? - Weekly Fixed Income Analysis
RBI MPC minutes for February suggests that inflation concerns are elevated for the MPC members and there are increasing signs that the policy makers have been way behind the inflation curve. G-sec yields will have to rise and rise fast.
Dated 26 Feb 2023
By Subhasis Mishra
Inverted US yield curve to drive down INR
3 month UST yields crossed 5% drawing in flows to USD from other currencies including INR.
Dated 20 Feb 2023
By Subhasis Mishra
Yield curve inversion points to liquidity concerns
Bond markets expect extreme tightness in liquidity till end March 2023 and short end yields are rising fast. Short end yields could spike in the next few weeks on advance tax outflows and year end demand for funds
Dated 19 Feb 2023
By Subhasis Mishra
USD rises on hawkish Fed commentary
USD traded higher last week on hawkish Fed commentary which also drives up the bond yields globally. Federal Reserve speakers, including Jerome Powell, have been hawkish this week, reiterating the need to raise interest rate further.
Dated 13 Feb 2023
By Ketan Verma
USD down as inflation eases
USD edged lower last week after data showed U.S. inflation was easing, prompting bets that the Federal Reserve will be less aggressive with rate hikes going forward. India’s CPI inflation falls to 5.72% in December from the 5.88% level seen in November.
Dated 16 Jan 2023
By Ketan Verma
What is the yield curve saying?
US Fed hiked interest rate by 50 bps as per expectation with indication of further rate hikes in coming days. It is expected that the fed fund rate will peak in 2023. Will this inversion continue and what does it mean for the gsec yield curve?
Dated 18 Dec 2022
By Arjun Parthasarathy
Are markets immune to rate hikes?
RBI hiked rates by 35bps last week and indicated more rate hikes ahead. Bond markets saw g-sec yields rising from lows but are still below highs seen a couple of months ago. OIS yields too are below highs after climbing post RBI policy. Have bond markets already factored in full extent of rate hikes?
Dated 11 Dec 2022
By Arjun Parthasarathy
25bps or 50bps rate hike by RBI this week?
Market factors seem to favour a 25bps rate hike by the RBI in its policy review this week but prudence is better than valour and a 5obps rate hike to counter potential inflation and global risk aversion will go a long way in easing market nervousness on future direction of yields.
Dated 5 Dec 2022
By Arjun Parthasarathy
G-sec yields to look beyond fall in inflation
Inflation is showing signs of easing from higher levels but for a longer-term stability of rates, the structural issues of artificially held rates and huge government debt have to be sorted. Central banks have held rates low for too long even as governments have borrowed heavily to support economies for many years now.
Dated 20 Nov 2022
By Arjun Parthasarathy
What will RBI do on 3rd November?
In a recent development, RBI has scheduled an additional meeting of Monetary Policy on 3rd November in the current scenario of elevated inflations, rupee depreciation and global rate hikes. Will the central bank raise the repo rate beyond 6.5% to cope with global rate hikes?
Dated 30 Oct 2022
By Subhasis Mishra
Repo rate most likely at 7% in the next 6 months
The sharp rise in 1 year OIS yield and 364 day T-bill yield to 7% levels suggest that RBI will hike the repo rate to 7% in the next 6 months to control inflation and prevent further INR depreciation and also maintain market stability in the face of a global bond crisis.
Dated 24 Oct 2022
By Arjun Parthasarathy
USD lower despite a hawkish statement from Fed officials
USD ended the week lower despite rising sharply against major peers tracking US treasury yields higher on Friday. INR rebounded from fresh record lows after touching a psychologically crucial level of Rs 83 a USD during the week
Dated 23 Oct 2022
By Ketan Verma
The flat yield curve is saying nothing yet
The g-sec yield curve is flat with 1 year to 40-year bonds all trading in a 50bps to 60bps range from 7% to 7.6%. However, reading into this flat shape tells us nothing of directions of yields going forward. Direction of yields is up given domestic and global factors.
Dated 16 Oct 2022
By Arjun Parthasarathy
INR plunges and outlook still negative
USD trended higher, boosted by a combination of hawkish Federal Reserve bets and safe haven flows. Global bond yields hit new multi-year highs after global rate hikes. INR along with other emerging market currencies crashed as risk sentiment plunged.
Dated 25 Sept 2022
By Ketan Verma
5-year G-sec yield to hit 8% soon
The fast-depreciating INR and tight liquidity conditions along with sharp rate hikes by the RBI to counter Fed rate hikes will push up yields at the short end of the curve and this will take up the 5-year g-sec yield to 8% levels from current levels of 7.4%.
Dated 25 Sept 2022
By Subhasis Mishra
G-sec yield curve to invert on liquidity crunch and rate hikes
System liquidity has dropped sharply and is likely to go negative on multiple counts including RBI selling USD, high credit offtake and rising inflation leading to policy tightening. OIS curve has jumped at the short end and g-secs are likely to follow.
Dated 18 Sept 2022
By Arjun Parthasarathy
INR steady despite sharp drop in fx reserves
India’s forex reserves have dropped by over 15% from peaks to USD 540bn on the back of rising trade deficit and RBI fx sales. However, improved FII inflows into equity and prospects of debt flows on the back of gsecs inclusion in EM bond indices have helped the currency to stabilize.
Dated 12 Sept 2022
By Subhasis Mishra
Indian bond market to deepen on G-secs in JPM Index
Bond market depth and liquidity will be major beneficiaries of Gsecs being included in JPM Index, as global interest will come in government and corporate bonds. Bond yields will initially react positively but going forward macro economic factors will prevail.
Dated 12 Sept 2022
By Subhasis Mishra
Strong government finances help ease borrowing worries
High inflation is pushing up gst collections and is helping contain fiscal deficit despite higher subsidy outgo on food, fuel and fertilizer. 10 -year g-sec yield has come off on easing worries of higher borrowing but concerns on inflation remain anchored.
Dated 4 Sept 2022
By Arjun Parthasarathy
Why RBI prefers high inflation?
RBI is still behind the inflation curve with repo rate at just 5.4% against inflation at close to 7% and is in no hurry to raise rates. High inflation brings down relative numbers like fiscal deficit and current account deficit. Bond yields will have to stay high given RBI preference for high inflation.
Dated 14 Aug 2022
By Arjun Parthasarathy
Calm before storm for government securities
The government bonds are going to experience the impact of domestic factors such as high inflation, falling rupee, policy rate hikes, higher market borrowing and global factors such as global rate hikes, elevated global inflations in near future.
Dated 24 Jul 2022
By Subhasis Mishra
RBI confidence on inflation coming off is misplaced on ultra high WPI
The continuing uptrend in wholesale inflation will cause INR to depreciate further. Government bond yields are likely to continue uptrend and the 10yr g-sec yield is expected to cross 8% in coming days.
Dated 18 Jul 2022
By Arjun Parthasarathy
INR to fall sharply if RBI goes slow on rate hikes
INR is trading at record lows and RBI governor Shaktikanta Das is underplaying inflation fears and is confident inflation will come off from October 2022. Given this, RBI rate hikes may be much slower than Fed or ECB and this could pull down the INR sharply.
Dated 11 Jul 2022
By Subhasis Mishra
USD rises after hawkish Fed comments
USD is rising on safe-haven flows. The same fears hurting demand for riskier assets are boosting demand for the USD. INR is hovering around its record lows, data showed that Indian factory output grew at the slowest pace in nine months.
Dated 3 Jul 2022
By Ketan Verma
INR is on a steady decline
The INR weakened last week to close at record lows. Widening CAD, global recession fears, inflation and high fiscal deficit is pulling the INR down. The outlook for the INR is negative and RBI is unlikely to intervene heavily and protect the currency from declining further.
Dated 27 Jun 2022
By Subhasis Mishra
Does USD/INR foretell g-sec yields?
The INR is at record lows and a study of past correlation suggests that g-sec yields will rise on further declines of the INR.
Dated 26 Jun 2022
By Arjun Parthasarathy
INR depreciation can accelerate on flat UST yield curve
The INR touched record lows against the USD last week on the back of a selloff in equities on worries of stagflation/recession in the US given a flat UST yield curve. INR is likely to touch Rs 80 to the USD on continued sell off in equities.
Dated 19 Jun 2022
By Subhasis Mishra
Inflation prints spooks currencies
The continuous rise in inflation in the US and Eurozone at 4-decade highs have spooked currency markets, which are not really finding safety given fall in JPY and rise in Euro against the USD.UST and Eurozone bond yields are rising sharply sending out fresh worries on sustainability if debt of governments.
Dated 12 Jun 2022
By Arjun Parthasarathy
Short end bonds can be riskier than long end bonds
Inversion in the yield curve where short end bond yields are higher than long end bond yields make investments in short maturity bonds riskier than investments in long maturity bonds. The g-sec yield curve could invert soon on rate hikes and tight liquidity conditions.
Dated 5 Jun 2022
By Arjun Parthasarathy
Will INR continue its fall?
The INR is trading at record lows with weakness on multiple fronts of capital outflows, rising trade deficit, high fiscal deficit and rising inflation. RBI cannot sell USD consistently given that market forces ultimately come out on top.
Dated 30 May 2022
By Arjun Parthasarathy
USD gains as investors turn risk averse
USD continues to gain as market participants sought shelter in safe-haven assets amid fears of the impact of surging inflation which will prompt US Fed to hike rates aggressively. INR trended at record lows on flight of capital.
Dated 23 May 2022
By Subhasis Mishra
Yield curves have a long way to go for stability
RBI hiked rates in an out of turn policy action last week and g-sec and OIL yields surged with a flattening bias of the yield curve. The rate hike cycle is just beginning and its a long way to go for market stability
Dated 8 May 2022
By Arjun Parthasarathy
USD & UST higher amid central banks changed stance
Fears over rising inflation, stagflation, and more hawkish central banks are making market sentiment weak and boosting the demand for more safe haven assets. The UST yields back over 3%, and the USD traced yields higher.
Dated 8 May 2022
By Ketan Verma
G-secs are at much less risk than UST and German Bunds
US, Eurozone and India CPI inflation are at 8.5%, 7.5% and 7% respectively while 10-year bond yields are at 2.9%, 1% and 7.15%. The Fed and the ECB have a lot of catching up to do on Inflation as they are far behind the curve while RBI is in a better position. This is a strong point for inflows into G-secs.
Dated 2 May 2022
By C S S Nikhil Bhargav
G-sec yields stabilise at higher levels as market plays carry game
G-sec auctions are going through smoothly without RBI having to intervene too much to protect bond yields from rising too fast. The bond market is getting good carry and if yields are stable, the carry game will continue.
Dated 24 Apr 2022
By Arjun Parthasarathy
USD surges on aggressive Fed hike outlook
USD traded higher as it drew support from Federal Reserve Chair Jerome Powell's comments on Thursday that backs a 50-bps tightening at next month's policy meeting, as well as his remarks on a likely consecutive rate hikes this year.
Dated 24 Apr 2022
By Ketan Verma
Government borrowing analysis
Market awaits Government borrowing calendar for H1FY23 to be notified by RBI, which will guide direction of g-sec yield movements in coming days. While record amount of Rs 14950 billion as gross borrowing has been budgeted for FY23, around 60% is expected to be borrowed during H1FY23.
Dated 27 Mar 2022
By Arjun Parthasarathy
How will RBI react to Fed rate hikes?
The Fed has signalled a tighter monetary policy with rate hikes and balance sheet size reduction on the back of very high US inflation. Bond markets in India will try and guess RBI stance on Fed rate hikes for direction on bond yields. How will RBI react?
Dated 20 Mar 2022
By Arjun Parthasarathy
USD falls despite Fed rate hike
USD ended the week lower despite the US Federal Reserve hiking interest rates. The US central bank raised interest rates by 25 basis points in a move that was widely expected by investors. INR rises despite ongoing global economic risks.
Dated 20 Mar 2022
By Ketan Verma
Why GOI Floating Rate Bond Prices have fallen despite rising yields
GOI FRBs should ideally perform well when interest rates are rising but the prices have actually fallen over the last one year. This is due to the absolute yields staying very low as RBI has kept rates low and is continuing its accommodative policy.
Dated 28 Feb 2022
By Arjun Parthasarathy
Potential shortfall of Rs 5 trillion in demand for g-secs and SDLs for FY23
Heavy supply of G-secs and SDLs for fiscal 2022-23 is seeing a huge gap in demand and this will lead to rising g-secs yields or higher inflation if RBI prints money to invest in g-secs.
Dated 14 Feb 2022
By Arjun Parthasarathy
USD strengthen as market eyes 50bps Fed rate hike in March
USD trades higher as soaring inflation boosted expectations that the Fed will look to aggressively raise interest rates across the year. The policy divergence between India and other developed nations is dragging demand for the INR.
Dated 13 Feb 2022
By Ketan Verma
No respite for bonds, as oil prices hit budget expectations
RBI devolved around 15% of the Rs 130 billion 5 year auction on to the underwriters at over 2 year high levels of 6.07% in the bond auction held last week. Bond markets are nervous on union budget due to rising oil prices and are losing appetite for bonds.
Dated 23 Jan 2022
By Arjun Parthasarathy
USD falls even as Fed Powell says rates could rise faster
USD lost ground after the producer price index, which measures inflation at the wholesale level rose by less than expected in December. INR ended the week higher tracing domestic equities and amid weakness in USD.
Dated 16 Jan 2022
By Ketan Verma
Interest rate risk premium on Gsecs to increase
Fed, BOE and ECB are starting to turn wary of structural high inflation taking hold of economies and are acting accordingly despite Omicron fears on the economy. Gsec yields are trending higher and will stay higher on rising interest rate risk premium.
Dated 20 Dec 2021
By Arjun Parthasarathy
Fed gets well behind inflation, India could see market bubbles and high inflation
Federal Reserve (Fed) came out with aggressive bond tapering program (USD 60 billion from January 2022), 3 rate hikes starting from March 2022 and 2 rate hikes in 2023 & 2024 respectively.
Dated 16 Dec 2021
By C S S Nikhil Bhargav
Global bond yields fall on demand for safe assets
The safe-haven yen and Swiss franc trade higher on Friday as global equities and bond yields fell on fears about the spread of the Omicron variant of COVID-19, which has resulted in renewed restrictions in parts of the world.
Dated 6 Dec 2021
By Ketan Verma
USD dominates as inflation heats up
USD is hovering around a 16-month high level amid surging inflation and expectations of a potentially more hawkish Federal Reserve. INR manages to end higher despite broad USD strength as falling oil prices & improving covid numbers offer support.
Dated 21 Nov 2021
By Ketan Verma
Will it be rate reversal for next 3 years?
RBI Governor Shaktikanta Das has been given a 3 year extension by the government. In the first 3 years, RBI had to fight a slowing economy and Covid crises and lowered interest rates to record lows. In the next 3 years, will it be a rate reversal?
Dated 31 Oct 2021
By Ketan Verma
USD higher ahead of Fed FOMC
The 10-year UST yield fell to 1.56% in a volatile session on Friday as the bond market remained unsettled ahead of next week’s Fed meeting. USD traded higher as the Fed preferred inflation measure (PCE) showed prices continuing to rise faster than its 2% target.
Dated 31 Oct 2021
By Ketan Verma
Gsec yields to only rise from hereon
10-year gsec yields closed at one-year highs last week despite CPI inflation printing at 4.35% for September, after staying well over 5% and 6% levels for a while. Markets are factoring higher inflation with economic recovery and less need for protection of yields by RBI
Dated 17 Oct 2021
By Arjun Parthasarathy
Gsec yields to normalise on RBI policy, US wage growth
RBI stopped Gsec purchases in its policy review last week, pushing up yields on government bonds. Gsec yields have been held artificially low by RBI through its bond purchases and market interference and the stopping of G-SAP program will help bond yields normalise to market driven levels.
Dated 10 Oct 2021
By Arjun Parthasarathy
Time is perfect for RBI to start raising interest rates
India’s macro is looking good and with economic outlook improving rapidly, RBI can easily start to normalise its ultra-loose monetary policy. If done too late, inflation can rise rapidly endangering economic growth.
Dated 4 Oct 2021
By Arjun Parthasarathy
Will RBI follow Fed on rate hike guidance?-Weekly Fixed Analysis
The last time Fed talked about taper and rate hikes, in 2013, the repercussions were severe with INR dropping and bond yields spiking. RBI had to take drastic measures to stabilise the market. Will RBI react more proactively now?
Dated 26 Sept 2021
By Arjun Parthasarathy
USD rises on Fed taper view-Weekly Currency Analysis
USD traded higher last week after US retail sales defied expectations and rebounded in August. INR ended the week marginally higher after RBI sees the inflation trajectory shifting down more favorably than initially anticipated.
Dated 19 Sept 2021
By Ketan Verma
G-sec yield curve to factor in rate hikes next year-Weekly Fixed Income Analysis
RBI recently stated that the inflation trajectory is shifting down more favorably than initially anticipated. As supply conditions return to normal and productivity gains the bank expects sustained decline in core inflation. This will allow the RBI to maintain its accommodative stance.
Dated 19 Sept 2021
By Arjun Parthasarathy
USD higher after hawkish Fed comments-Weekly Currency Analysis
USD posted a weekly gain as market participants reassessed the likelihood of the Federal Reserve tapering bond purchases this year. INR ended lower last week in risk-off trade with worries of slowing growth creep in.
Dated 12 Sept 2021
By Ketan Verma
Sentiment improving for long end of the curve G-secs?
The auction of the new 14-year bond maturing in 2035 saw 3x demand for the Rs 100 billion of bonds on offer and the yield cut-off came in bullish at 6.67%. Has the sentiment turned for long-end g-secs that were trading at higher levels for the past many months?
Dated 12 Sept 2021
By Arjun Parthasarathy
G-sec yields trend down on improving government finances - Weekly Fixed Income Analysis
10-year g-sec yield trended down from highs, as the bond-market looked at the GDP growth, tax collections, exports and equity values as highly favorable factors for improvement in government finances.
Dated 5 Sept 2021
By Arjun Parthasarathy
Should RBI anticipate 2008 crisis all over again?-Weekly Fixed Income Analysis
Fed is going to keep rates down for extended period of time and this is causing asset prices to rise substantially to bubble territory. RBI has plenty to do to manage growth, inflation, capital flows and potential market collapse like in 2008 credit crisis.
Dated 30 Aug 2021
By Arjun Parthasarathy
G-sec auctions see demand on global growth worries-Weekly Fixed Income Analysis
Worries over a third wave of covid 19 brought about risk aversion in markets and bond yields declined marginally on global economic growth tapering off. G-sec auction saw demand after a long while.
Dated 22 Aug 2021
By Arjun Parthasarathy
RBI QE does not prevent rise in g-sec yields - Weekly Fixed Income Analysis
RBI is now becoming the single largest buyer of government bonds and has bought over Rs 1.5 trillion of bonds till date. However, bond yields have risen as RBI funding government fiscal deficit is seen as inflationary in nature.
Dated 15 Aug 2021
By Arjun Parthasarathy
USD falls as delta worries shakes economic recovery-Weekly Currency Analysis
USD fell as the concern about the Delta variant is finally catching up to financial assets. INR edged lower as India’s retail inflation cooled in July after pushing above 6% for two consecutive months.
Dated 15 Aug 2021
By Ketan Verma
Unwanted!! Benchmark 5- & 10-year G-secs - Weekly Fixed Income Analysis
Administered pricing of G-secs like small savings rates or even fuel and agri commodities leads to lack of market confidence. RBI needs to let the market determine the yields on benchmark bonds while it goes about setting its policy stance and buying bonds.
Dated 1 Aug 2021
By Arjun Parthasarathy
Bond markets start to play yield curve spreads -Weekly Fixed Income Anlysis
10-year benchmark bond, 6.10% 2031 bond, yield rose by 3bps to 6.16% while the 6.57% 2033 bond yield came off sharply by 23bps to 6.65%. The market is starting to play yield curve spreads and this will continue going forward.
Dated 25 Jul 2021
By Arjun Parthasarathy
Parts of the G-sec yield curve are cracking-Weekly Fixed Income Analysis
G-sec and SDL yields have moved up sharply from lows in the last one month on market’s fear of inflation and government fiscal deficit. RBI has tried to keep yields optically stable by focusing on benchmark bonds but other parts of the yield curve are cracking.
Dated 4 Jul 2021
By Arjun Parthasarathy
New fiscal stimulus is bond positive and negative
Synopsis: Latest fiscal stimulus will improve the creditworthiness of corporates that are struggling with covid lockdowns but will also pull up inflation. Corporate bonds trading at higher yields can be attractive while gsecs, psu bonds, and AAA corporate bonds may see a rise in yields on inflation.
Dated 29 Jun 2021
By C S S Nikhil Bhargav
Why is RBI not issuing new 10-year G-sec?-Weekly Fixed Income Analysis
The 10-year g-sec yield is a reference level for pricing all other bonds and even loans. Global investors base their research and investment decisions based on the 10-year g-sec yield movement.
Dated 27 Jun 2021
By Arjun Parthasarathy
Lack of bond market volatility is worrying-Weekly Fixed Income Analysis
High CPI inflation and Fed signalling rate hikes are clearly bond price negative, but bond markets saw hardly any price movement in G-secs. Volatility is essential for markets and this lack of volatility is a big worry
Dated 20 Jun 2021
By Arjun Parthasarathy
Inflation bug bites Fed, is RBI next?
US inflation surge in May is prompting the Fed to raise market expectations of rate hikes. However, even with high inflation, rate hikes will start only in 2023. In the meanwhile, Fed will start to taper bond purchases soon before starting to raise rates.
Dated 17 Jun 2021
By Arjun Parthasarathy
USD rises as market look to upcoming FOMC-Weekly Currency Market Analysis
Stronger-than-expected consumer confidence boosts demand for USD ahead of next week’s Federal Reserve monetary policy announcement. U.S. consumer price index jumping 5.0% year-on-year in May, the sharpest rise in 13 years.
Dated 13 Jun 2021
By Ketan Verma
30-year G-sec yield tells story of impending inflation spike -Weekly Fixed Income Analysis
The spread of the 30 year bond yield over the 10 year bond yield has risen sharply over the last one year indicating that the market expects inflation to overshoot RBI’s estimates by a wide margin.
Dated 6 Jun 2021
By Arjun Parthasarathy
USD & UST yields rise amid inflation surprise-Weekly Currency Analysis
USD & UST yields rose sharply after the market reacted to the data which revealed that US inflation surged in April. INR ended the week lower against USD as retail inflation for April weakened to 4.29%.
Dated 16 May 2021
By Ketan Verma
RBI G-SAP – Will inflation shoot up?
RBI announced a Gsec acquisition program, G-SAP, for Rs 1 trillion for the current financial year quarter to help the market absorb government borrowing. This can lead to high inflation, hurting bond investors down the line.
Dated 11 Apr 2021
By Arjun Parthasarathy
Borrowing, Covid surge and inflation to weigh on RBI April 2021 policy meet
RBI monetary policy meeting in the 1st week of April 2021 gains significance as it has to manage a huge government borrowing and also temper fast rising inflation expectations even as covid cases are surging. Will RBI hike rates soon?
Dated 4 Apr 2021
By Arjun Parthasarathy
USD supported by Biden’s spending plan
USD strengthened against major currencies as market participants bet on fiscal stimulus and aggressive vaccinations which will help the U.S. to grow faster than other economies. INR is under pressure as the covid situation continues to deteriorate.
Dated 4 Apr 2021
By Ketan Verma
USD & UST Yields jump post-Fed announcement
USD edged higher last week largely helped by rising U.S. Treasury yields even after the Federal Reserve reiterated that it was in no hurry to raise interest rates while predicting strong growth in the world’s largest economy. Reading time 4 minutes.
Dated 21 Mar 2021
By Ketan Verma
Why retailisation of G-secs is important to absorb bond supply-Weekly fixed income
High government borrowing can cut private sector access to capital making India’s vision of a USD 5 trillion economy not achievable. Individual savings can help absorb the borrowing through realisation of the Gsec market. Reading time- 3 minutes
Dated 21 Mar 2021
By Arjun Parthasarathy
Fed FOMC will set the tone for USD & US Treasury Yields
USD traded lower as inflation missed expectations and jobless claims dropped to the lowest level since the pandemic started. Attention has now turned to this week’s Fed FOMC monetary policy announcement. Reading time 4 minutes.
Dated 14 Mar 2021
By Ketan Verma
RBI rate hike in April is the only balm to calm nervous bond markets-Weekly Fixed Income
Rising inflation expectations, spiking UST yields and high government borrowing have taken up bond yields by 40bps to 80bps across the curve. A rate hike in April will send positive signals to the market that RBI is staying on top of inflation. Reading time 4 min
Dated 14 Mar 2021
By Arjun Parthasarathy
USD & US Treasury Yields surge after strong jobs report
US government bond yields have been rising significantly due to high inflation expectations and this is strengthening the USD on the back of capital moving back to US bonds from other foreign currency assets. Reading time 6 minutes.
Dated 7 Mar 2021
By Ketan Verma
Revised Government Borrowing for Feb-March 2021, total gross borrowing stands at Rs 13.9 trillion during FY21
As per Union Budget-FY22 announcement, Government of India will borrow Rs 2160 billion during Feb & March 2021. Total gross market borrowing stood at Rs 13900 billion during FY21.
Dated 16 Feb 2021
By Subhasis Mishra
OMOs Cap Bond Yields Spike but Yields Will Stay High
Government bond yields fell marginally last week on the back of RBI OMO purchase auction announcement.
Dated 6 Nov 2020
By Arjun Parthasarathy
10-year Gsec yield is likely to rise on Joe Biden's win
USA Elections 2020 results have not been announced yet. Democratic candidate Joe Biden is leading Republican nominee, President Donald Trump, in terms of electoral votes. Markets are factoring in Biden's Win in USA Election 2020 as he's inching towards the majority of 270 mark.
Dated 5 Nov 2020
By Arjun Parthasarathy
RBI Support to Government Borrowing May not Prevent Huge Market Volatility
The government, in a surprise announcement, increased the gross borrowing for this fiscal year to Rs 12 trillion from Rs 7.80 trillion budgeted and the 1st half borrowing was increased to Rs 6 trillion from Rs 4.88 trillion.
Dated 28 Oct 2020
By Arjun Parthasarathy
SDLs can see higher market liquidity, as RBI purchases SDLs
RBI first ever SDL OMO purchase auction of Rs 100 billion saw total amount offered by participants at Rs 154.75 billion, out which Rs 100 billion was accepted. Highest cut off yield stood at 6.68% for 7.95% JAMMU KASHMIR SDL 2030.
Dated 25 Oct 2020
By Arjun Parthasarathy
Government Of India Increases Market Borrowing For H2FY21
Government of India revised borrowing for Oct 2020- March 2021.To meet GST Compensation Cess shortfall of Rs 1.1 trillion, the Government of India borrowing calendar is extended. For the H2FY21 (from 19th October 2020 to 12th March 2021)
Dated 16 Oct 2020
By Paresh Nemade
RBI Keeps a Lid on Yields, for Now
RBI, sensing fatigue in the market for government bonds, conducted an operation twist for total purchase and sale of bonds of Rs 200 billion. 10-year benchmark bond yield fell by 5bps after rising by almost 15bps from lows on the back of the RBI operation twist.
Dated 9 Sept 2020
By Arjun Parthasarathy
Inflation, Fiscal Mess, Operation Twist, Auction Devolvement add to Market Fears
RBI August 2020 policy minutes suggest hawkishness over inflation and possibility of no more rate cuts going forward. Central and state government finances are in a huge fiscal mess and borrowings are set to increase from already high levels.
Dated 9 Sept 2020
By Arjun Parthasarathy
RBI Is Stifling Bond Trader
RBI kept rates at record lows in its policy review last week and pledged high liquidity and continued accommodative policy given the forecast of negative GDP growth this year. The central bank has kept the door open for more rate cuts. The lack of rate cuts pushed up bond yields marginally across the curve.
Dated 10 Aug 2020
By Arjun Parthasarathy
RBI Keeps a Lid on Yields, for Now
RBI, sensing fatigue in the market for government bonds, conducted an operation twist for total purchase and sale of bonds of Rs 200 billion. 10-year benchmark bond yield fell by 5bps after rising by almost 15bps from lows on the back of the RBI operation twist.
Dated 5 Jul 2020
By Arjun Parthasarathy
Rising Fuel Prices, Labour Shortage, Import Bans to Push Up Inflation
Lower global crude oil prices have had an opposite effect on retail fuel prices, with the prices rising by more than 12% over the last one month. The government desperately requires revenues given the economic slowdown on lockdown and is targeting duties from fuel as a source of revenue.
Dated 28 Jun 2020
By Arjun Parthasarathy
G-sec Yields May Have Hit the Floor
A steepening UST yield curve drove risk appetite higher in global markets, pulling up risk assets.
Dated 8 Jun 2020
By Arjun Parthasarathy
RBI OMO Awaited as Nominal GDP Growth Falls
RBI delivered on rate cuts with the Repo rate at record low levels of 4% and Reverse Repo rate at 3.35%.
Dated 31 May 2020
By Arjun Parthasarathy
USD to Weaken on Fresh Trade Wars
INR ended the week higher against USD on optimism over the progress in a drug trial for the treatment of COVID-19 and also over the expectation of re-opening of several economies that had come to a halt due to the coronavirus pandemic.
Dated 3 May 2020
By Ketan Verma
Monetization of Fiscal Deficit, Good or Bad?
The government is looking at further measures to support the economy that has suffered due to the lockdown, and the total bailout and stimulus coupled with lack of tax collection and other revenues could potentially double the fiscal deficit from targeted 3.5% of GDP.
Dated 3 May 2020
By Arjun Parthasarathy
Low Bond Market Participation is Worrying RBI
RBI announced an operation twist, selling 2020-21 maturity bonds and buying bonds maturing in 2026,28,29,30.
Dated 27 Apr 2020
By Arjun Parthasarathy
Rate Cut Expectations to Tussle with Extremely Weak Government Finances
RBI in an unscheduled policy announcement cut the reverse repo rate by 25bps, widening the LAF repo-reverse repo corridor to 65bps in order to discourage banks to park excess liquidity with the RBI.
Dated 19 Apr 2020
By Arjun Parthasarathy
Bond Markets Shiver Despite RBI Policy
10 year benchmark bond, the 6.45% 2029 bond, saw volatile trading last week, falling by 30bps then rising from lows by 14bps. Bond markets got a whiff of impending rate cuts and took down yields from highs and once RBI announced its rate cuts on Friday, the markets took profits.
Dated 6 Apr 2020
By Arjun Parthasarathy
Bond Market to Position for Rate Cuts, Liquidity, Borrowing and INR
The impact of corona virus on the economy will prompt RBI to cut rates by at least 50bps to record lows. Bond markets are factoring in steep rate cuts with the 5 year OIS yield trading at 4.77%.
Dated 8 Mar 2020
By Arjun Parthasarathy
Government Debt Rollover Pulls up bond yields
The RBI announced a Bond Switch or Conversion auction for Rs 370 billions scheduled on the 24th of February.
Dated 23 Feb 2020
By Arjun Parthasarathy
Helicoptor RBI?
RBI is pumping in money into the markets at cheap rates to encourage banks to lend and also to invest in credit markets.
Dated 9 Feb 2020
By Arjun Parthasarathy
What is the Out look for the Worst Performing Asset in 2017?
The benchmark 10 year government bond is the worst performing asset in calendar year 2017.
Dated 31 Dec 2019
By Arjun Parthasarathy
USD Fell Amid Trade War Optimism
INR ended the week lower against the USD amid persistent USD buying by the central bank, along with concerns about India’s weakening growth, crude oil price rise and strain on government’s finances, all of which have led to a view of weakness in the INR.
Dated 29 Dec 2019
By Ketan Verma
RBI Adds a Twist but Markets Will be Wary
RBI is buying the 10 year bond and selling short end bonds, an action that is termed as “Operation Twist”. Twist was done by the US Federal Reserve to bring down long term bond yields in order to keep long term interest rates down.
Dated 22 Dec 2019
By Arjun Parthasarathy
Liquidity is Holding the Bond Market Firm
Weak economic data from IIP growth to inflation and trade is hurting sentiments on the government’s fiscal deficit.
Dated 18 Nov 2019
By Arjun Parthasarathy
USD Under Pressure Amid Weak Economic Data
INR ended the week lower against the USD last week, as foreign portfolio investors pulled out funds from domestic assets after the RBI delivered a lower-than-expected cut in the repo rate in its monetary policy meeting on Friday.
Dated 7 Oct 2019
By Ketan Verma
New 10 year G-sec Yield to Fall Sharply on Risk Aversion
The cut off in the auction of a new 10 year benchmark government bond came in at 6.45% and the bond yield trended up by 1bps post cut off to close at 6.46%. The old 10 year benchmark bond, the 7.46% 2029 bond saw yields close at 6.66%, 20bps spread to the 6.45% 2029 bond.
Dated 5 Oct 2019
By Arjun Parthasarathy
Improving Risk Sentiment Helps INR to Gain
INR ended higher against USD last week amid easing crude oil prices and foreign fund inflows.
Dated 30 Sept 2019
By Ketan Verma
ECB Policy, Domestic Data to Drive RBI Rate Cuts in October 2019
ECB lowering deposit rates by 10 bps to negative 50bps and announcing bond purchase program of Euro 20 billion a month will drive central banks across the world from US Fed onwards to cut rates to keep currencies competitive.
Dated 15 Sept 2019
By Arjun Parthasarathy
5 year Swap Yields Plunge on Bets of RBI Removing Floor on Overnight Rates
The release of weak GDP growth data for the1st quarter of fiscal 2019-20, where GDP growth came in at 5%, against full year growth forecasts of around 7%, increased markets expectations of rate cuts by the RBI in its October 2019 policy review.
Dated 7 Sept 2019
By Arjun Parthasarathy
30 year UST Yields Fall to Record Lows on Growth Fears
INR traded higher against the USD last week following positive developments in the US-China trade talks, easing crude oil prices and over RBI’s decision to transfer a record Rs 1.76 trillion dividend and surplus reserves to the government.
Dated 2 Sept 2019
By Ketan Verma
Steepening G-sec Yield Curve at Odd swith Inverted Swap Curve
The 2 year government bond saw yields at 5.87% levels with strong bids seen in the last auction. However the benchmark 10 year bond has seen yields rise by over 25 bps from lows over the last three weeks on worries of extra borrowing by the government to provide stimulus to the economy.
Dated 26 Aug 2019
By Arjun Parthasarathy
Bond Yields Moving on “Noise” Factors
The “Noise” surrounding bond markets has increased in volume and this is moving bond yields at present. Bond yields are being jerked up and down on the various factors that are hitting the markets on an almost everyday basis.
Dated 18 Aug 2019
By Arjun Parthasarathy
Risk Aversion Grips Global Bonds & Currencies
INR ended the week lower against the USD amid weak risk appetite.
Dated 18 Aug 2019
By Ketan Verma
Currency Volatility to Rise
Currency markets will see high volatility amid the noise surrounding the markets.
Dated 12 Aug 2019
By Ketan Verma
10 year G-sec at 6.36%, Where from Here?
The bullish case for interest rates is still high and that will keep the 10 year government bond yield down and on a downward path, with bits of volatility here and there. RBI, if it sounds caution on more rate cuts in its August policy meet, can drive up the bond yield sharply.
Dated 20 Jul 2019
By Arjun Parthasarathy
Bullish Bond Market, What are the Best Bonds to Buy Now?
Rate cut by the RBI in its August policy review is almost certain on the back of the government lowering the fiscal deficit from 3.4% of GDP to 3.3% of GDP for this fiscal year in its budget presented on the 5th of July.
Dated 4 Jul 2019
By Arjun Parthasarathy
Multiple Positive Cues for Bond Yields
Interest rate curves fell sharply last week on the back of multiple positive cues for rates.
Dated 17 Jun 2019
By Arjun Parthasarathy
Fed Rate Cut Bets to Drive in FII Flows into G-Secs
Fed rate cut bets pushed down yields on the 10 year UST and also drove down the USD against global majors.
Dated 10 Jun 2019
By Arjun Parthasarathy
Bond Yields to Fall on Rate Cuts, OMOs
The election victory for the ruling NDA party has taken out political risk from bond markets and also ensures continuity of fiscal policy, as laid out in the interim budget for fiscal 2019-20. Bond yields fell sharply on rate cut hopes and increased liquidity infusion by the RBI.
Dated 25 May 2019
By Arjun Parthasarathy
Bond Market Sentiments Improving
Bond market sentiments are turning distinctly positive with INR strengthening to below Rs 70 to the USD, FIIs turning net buyers of bonds, central banks across the globe turning dovish and RBI buying bonds through OMOs to infuse liquidity into the system.
Dated 10 Mar 2019
By Arjun Parthasarathy
OIS Reflects Optimsm but Not G-secs and Credits
OIS (Overnight Indexed Swaps) yields fell sharply last week on rate cut optimism.
Dated 2 Mar 2019
By Arjun Parthasarathy
Short End Bonds Bullish on Rate Cut Expectations
Bond yields at the short end of the curve turned bullish on rate cut expectations in RBI April policy.
Dated 18 Feb 2019
By Arjun Parthasarathy
Supply Concerns to out weigh RBI’s Expected Change in Policy Stance
The interim budget for 2019-20 unveiled higher spending by the government on farmers and unorganized workers and tax sops for the middle class, which have led to fiscal deficit being set at 3.4% of GDP, higher than target of 3% of GDP.
Dated 11 Feb 2019
By Arjun Parthasarathy
Are Rate Cuts Here to Stay, Markets Believe So at the Moment?
The rate cut by the RBI in its policy review last week, saw the markets pulling down yields at the short end of the yield curve with the benchmark 5 year government bond yield falling by 21bps while the 10 year benchmark bond yield fell by just 5bps on a week on week basis.
Dated 11 Feb 2019
By Arjun Parthasarathy
Fed Statement Over shadows Upbeat U.S. Job Report
The INR remained rangebound throughout the week against the USD but ended the week lower as concerns related to fiscal slippage weighed on the sentiment after the interim budget unveiled some big populist measures ahead of the general elections.
Dated 11 Feb 2019
By Ketan Verma
Fiscal Worries & Higher Crude Oil Prices Drive INR Lower
The INR posted a second consecutive weekly loss against the USD, largely due to foreign fund outflows, higher crude oil prices, stronger USD and concerns over an expansionary fiscal policy in the upcoming budget.
Dated 20 Jan 2019
By Ketan Verma
New 10year G-Sec Yield AT 7.26%, Where to from Here?
The government issued a new ten year benchmark bond last week, the 7.26% 2029 bond.
Dated 13 Jan 2019
By Arjun Parthasarathy
Plunging Onion Prices Drives G-sec Yields Higher
Onion prices have fallen by more than 80% and this is worrying the bond market.
Dated 30 Dec 2018
By Arjun Parthasarathy
Credit Spreads Offer a Good Risk Profile
Banks have been beneficiaries of the freeze in credit markets post IL&FS defaults a couple of months back.
Dated 25 Nov 2018
By Arjun Parthasarathy
Short End Credits Stay Under Pressure despite Gsec Rally
Government bond yields fell last week on the back of RBI OMO bond purchases, expectations of a lower CPI inflation print for September 2018, INR rallying from record lows and drop in UST yields from multiyear highs.
Dated 14 Oct 2018
By Arjun Parthasarathy
IL&FS is not Reflective of the whole NBFC Sector
The October RBI policy decision of no rate hike was largely determined by the mess caused by IL&FS default.
Dated 6 Oct 2018
By Arjun Parthasarathy
The Worst may be Behind for Bond Markets
The bond market has had a difficult period for the whole of this fiscal year with sentiments being hurt by multiple factors of INR depreciation, FII selling, bond supply from centre and states, RBI rate hikes, rising oil prices and even a credit crisis on IL&FS default. Liquidity too has turned structurally negative.
Dated 29 Sept 2018
By Arjun Parthasarathy
Credit Markets Facing Volatility on NBFC Worries Post IL&FS Default
Volatility shifted to credit markets last week on the back of contagion effect of IL&FS default. Yields on DHFL CPs and bonds spiked on Friday as rumors of liquidity issues with the company hit the market
Dated 21 Sept 2018
By Arjun Parthasarathy
Sentiments to Stay Negative for Bonds
The bond market is hit by negative factors from all sides, falling INR, negative BOP for the 1st quarter of fiscal 2018-19, rising fuel prices, RBI rate hike expectations in October, higher probability of more Fed rate hikes, risk aversion on global trade tensions and impending higher government bond supply starting October 2018.
Dated 9 Sept 2018
By Arjun Parthasarathy
Strong Economy Gives RBI Lots of Head room to Raise Rates
The first quarter 2018-19 GDP growth at 8.2% is higher than RBI full year forecast of around 7.4%.
Dated 2 Sept 2018
By Arjun Parthasarathy
Can Economic Growth Help INR?
The Indian Rupee (INR) breached Rs 71 level against the USD for the first time ever on Friday on the back of a selloff in emerging market currencies gathering pace, month-end demand for the USD from oil importers and rise in crude oil prices.
Dated 2 Sept 2018
By Ketan Verma
Heightened Global Uncertainty in Likely to Keep INR Under Pressure
The INR fell to below Rs 70 to the USD for the first time ever on the 14th of August 2018 and touched an all-time low level of Rs 70.40 to the USD, on the back of Turkish Lira collapse and widening trade deficit.
Dated 19 Aug 2018
By Ketan Verma
RBI has Leeway to Raise Rates by 50bps in August 2018 Policy Meet
50bps rate hike will take up bond yields by around 25bps after which yields will stabilise. Overall, bond markets will view the 50bps rate hike as positive as pace of rate hikes can then be easily calibrated going forward removing market uncertainty.
Dated 29 Jul 2018
By Arjun Parthasarathy
Bond Markets to Return to Normalcy
Bond markets are returning to normalcy after three months of high volatility that saw 10 year government bond yields jumping sharply by 80bps from levels of 7.20% seen post RBI April policy meet to multi year high levels of 8%.
Dated 24 Jun 2018
By Arjun Parthasarathy
Credit Markets is Where Money Will be Made in India
Bond markets in India and globally are factoring in policy normalization by central banks. RBI hiked the repo rate in its meeting on the 6th of June while Fed hiked rates for the 2nd time this year in its meeting last week.
Dated 17 Jun 2018
By Arjun Parthasarathy
RBI Rate Hike Lowers Market Uncertainty - RBI June 2018 Policy Review
The 25bps rate hike by the RBI lowers uncertainty for markets on the timing of the hike. Bond yields are largely factoring in multiple rate hikes and the 25bps rate hike has not moved markets by much.
Dated 6 Jun 2018
By Arjun Parthasarathy
Yield Curves are Trading on Fear, which Provides Opportunity for the Strong Hearted
RBI and the government must calm fears on Banks stability if markets are to trade normally. Fear provides opportunity for traders and investors to buy into higher yields but volatility will be high and one would have to have a strong heart to ride out the volatility.
Dated 22 May 2018
By Arjun Parthasarathy
Bond Market Volatility, at What Yields Can Sentiments Turn Normal Again?
Bond yields will hover around 7.75% with an inclination to rise but at every higher level of yields, market sentiments will start to change as the market is overly pessimistic at this point of time.
Dated 22 Apr 2018
By Arjun Parthasarathy
SDL’s to Face Rough Weather in Fiscal 2018-19
State government borrowings are rising and rising fast. India’s state government borrowing at over Rs 4.07 trillion in fiscal 2017-18, is around 22% of total SDLs outstanding as of fiscal 2016-17, which was at Rs 18548 billion.UDAY bonds outstanding is at Rs 2.08 trillion.
Dated 18 Mar 2018
By Arjun Parthasarathy
Bench mark Bonds Rotational Trading is Leading to Yields Spiking
Bond prices tanked again last week, taking 10 year benchmark government bond yields to two year high levels of over 7.75%. Bond yields have been on a sustained rise since October 2017, with yields rising by over 100bps. Bond yields rose to levels of 7.78% last week before paring losses to close at 7.68%.
Dated 24 Feb 2018
By Arjun Parthasarathy
RBI Will Have to Buy Rs 1 trillion of Bonds in Fiscal 2018-19
The bond market is really worried about the absorption of supply of government bonds in fiscal 2018-19. The government is scheduled to borrow a gross of Rs 6.05 trillion and net of Rs 4.62 trillion of dated government bonds.
Dated 11 Feb 2018
By Arjun Parthasarathy
Good Money is to be Made in Bonds over 2months, but Patience is Required
The bond market is giving good levels for making money over the next 2 months. Bond yields have backed up sharply over a shot spam of time and risk – return is in favour of long rather than short positions.
Dated 5 Feb 2018
By Arjun Parthasarathy
Fed’s Upbeat Remarks Drive USD Higher
Indian Rupee depreciated by 0.81% against USD and by 2.45% against Euro.
Dated 4 Feb 2018
By Ketan Verma
Big ? on Absorption of around Rs 11 trn of Supply in Fiscal 2018-19
The Central and State Governments are set to borrow a total of around Rs 11 trillion in fiscal 2018-19. Central government gross borrowing is estimated at Rs 6.4 trillion (Read our note on Fiscal Deficit and Government Borrowing for 2018-19) while states could borrow a gross of Rs 4.6 trillion.
Dated 28 Jan 2018
By Arjun Parthasarathy
USD Continues its Downward Trend
The USD is having a very difficult start to the year after weakening by around 10% against a basket of major currencies last year. Economic outlook in other parts of the world, particularly in Europe, has improved, leading to the USD losing its safe haven status.
Dated 14 Jan 2018
By Ketan Verma
Near Term Negatives Outweigh Positives for The New Bench mark 10 year Bond
The government auctioned a new ten year benchmark bond in its bond auction last week. The cut off for the bond came in at 7.17% and post auction cut off, the bond yield fell to 7.09% levels.
Dated 8 Jan 2018
By Arjun Parthasarathy
Factors that Drove 10 year Gsec Yields in CY-2017
The benchmark 10 year government bond, the 6.97% 2027 bond, saw yields close at calendar year highs last week.
Dated 24 Dec 2017
By Arjun Parthasarathy
10 year Gsec at 7%, Has it Peaked?
Supply creates its own demand when there are expectations of rate cuts or of inflation staying low.
Dated 12 Nov 2017
By Arjun Parthasarathy
Supply will Pull Up Bond Yields
The Rs 2.11 trillion bank recapitalisation plan and the Rs 6.92 trillion road construction plan entails huge supply of bonds.
Dated 29 Oct 2017
By Arjun Parthasarathy
INR Fall is Temporary
Indian Rupee fell to 6-month low levels against the USD.
Dated 24 Sept 2017
By Ketan Verma
USD Fights Back Amid Weak Economic Data and Fresh North Korea Tension
USD remained highly volatile last week but managed to end the week higher against all of the major currencies except for the British pound despite a weaker retail sales report and news that North Korea fired another missile over Japan.
Dated 17 Sept 2017
By Ketan Verma
USD Hit by Concerns Over North Korea, Rates Outlook
USD came under pressure last week on rising tensions between the U.S. and North Korea, a top Federal Reserve official urging caution over further rate increases until the pace of inflation improved and hurricanes causing disaster in the US.
Dated 10 Sept 2017
By Ketan Verma
UST and USD area Liquidity Headache for RBI
Sliding UST yields and USD is a liquidity headache for RBI.
Dated 10 Sept 2017
By Arjun Parthasarathy
USD Gains Despite Weak Jobs Report
USD ended the week on a higher note despite weak monthly jobs report.
Dated 3 Sept 2017
By Ketan Verma
RBI Will be Under Intense Pressure on Rate Cuts
Incremental news and data point to more monetary easing by the RBI in its October 2017 policy review.
Dated 12 Aug 2017
By Arjun Parthasarathy
5 year OIS factoring in 25bps rate cut in October
The OIS market saw 5 year OIS yields falling by 14bps week on week to close at levels of 6.12%.
Dated 5 Aug 2017
By Arjun Parthasarathy
Yuan Strengthens despite Downgrade
Moody’s Investors Services on Wednesday downgraded China’s long-term local and foreign currency issuer ratings by one notch to A1 from Aa3, citing expectations that the financial strength of the world’s second-biggest economy would erode in the coming years.
Dated 28 May 2017
By Ketan Verma
Bond Market has a Big Problem with Excess Liquidity
The system is facing a glut of liquidity and it is creating problems for the bond market. Liquidity that was in high surplus due to demonetization has been rising despite money going out of the system through currency in circulation, which has risen by Rs 800 billion in the first three weeks of this month.
Dated 1 May 2017
By Arjun Parthasarathy
INR Strength to lead to MSS Bonds and OMO Sales
The INR closed at its highest level in over 18 months at Rs 64.40 to the USD last week.
Dated 9 Apr 2017
By Arjun Parthasarathy
Bond Markets Buying Into Higher Spreads
Government bond yield curve spreads and credit spreads fell last week as the market bought into higher levels of spreads.
Dated 26 Mar 2017
By Arjun Parthasarathy
SDL Supply Hurts Bond Traders
State Government Borrowings saw concerns raised by the Monetary Policy Committee (MPC) in their 8th February meeting.
Dated 26 Feb 2017
By Arjun Parthasarathy
U.S. Economy Out look to Support USD in Coming Weeks
USD closed at 14 year highs last week, largely on the expectations that a fiscal expansion planned by U.S. President-elect Donald Trump will boost inflation and lead to a faster pace of interest rates hikes in 2017.
Dated 25 Dec 2016
By Ketan Verma
Has RBI Lost its Last Rate Cut Chance?
RBI, against all expectations kept rates status quo in its policy meet on the 6th and 7th of December.
Dated 10 Dec 2016
By Arjun Parthasarathy
INR, Calm Despite Fall
The INR fell to levels last seen in February 2016 on the back of a broad USD strength.
Dated 20 Nov 2016
By Ketan Verma
What will Banks do with the Liquidity from Demonetisation?
Banks are flooded with deposits post demonetization of Rs 500 and Rs 1000 notes.
Dated 19 Nov 2016
By Arjun Parthasarathy
Fixed Income Growth Portfolio (FIGP) bucks Trend of Rising Yields - November 2016
Indian bond yields rose during the last one month on the back of supply worries and rise in global bond yields, however our fixed income growth portfolios value stayed stable reflecting the good choice of securities.
Dated 7 Nov 2016
By Arjun Parthasarathy
U.S. Economy Optimism Making a Strong Case for 2016 Rate Hike
USD continued to gain against major world currencies for the second consecutive week on heightened expectation for an early Fed rate hike, which was boosted after a string of strong economic data released last week.
Dated 17 Oct 2016
By Ketan Verma
Where is the Value in the Gsec Yield Curve? Any bond between 7.10% and 7.20% yield.
The gsec yield curve has dropped sharply and flattened out over the last six months.
Dated 24 Sept 2016
By Arjun Parthasarathy
Oops, the Fed all over again, could hurt the 6.97% 2026 bond in the short term!!
The late Friday sell off in US and European equities and bonds will cast a shadow on the rally in domestic bonds, which has seen the new ten year bond, the 6.97% 2026 bond yield falling by 14bps since issuance on the 2nd of September.
Dated 12 Sept 2016
By Arjun Parthasarathy
Dr.Urjit Patel is the best choice for RBI Governor but bond market is afraid
Dr. Urjit Patel is appointed RBI Governor and bond yields will rise in the short term.
Dated 23 Aug 2016
By Arjun Parthasarathy
USD Rallies as Strong US Jobs Report Boosts Bets on Fed Rate Hike
Friday’s unambiguously strong nonfarm payrolls report sent the USD soaring against all of the major currencies as it bolstered expectations that the Federal Reserve will raise interest rates as soon as this year.
Dated 7 Aug 2016
By Ketan Verma
USD slumps on weak USGDP report and BoJ Disappointment
USD traded lower against most of the major currencies last week, particularly against the Japanese Yen. USD/JPY dropped from JPY 106.30 to below JPY 102 after the Bank of Japan announced a very modest increase in monetary stimulus.
Dated 31 Jul 2016
By Ketan Verma
What Factors can Stall the Bond Rally?
Government bonds continued the post Brexit rally last week with yields falling by 1bps to 7bps across the curve.
Dated 23 Jul 2016
By Arjun Parthasarathy
USD, Asian Currencies to Gain in the Coming Weeks
Encouraging U.S. economic data, landslide victory for Japan’s ruling coalition, Britain’s easing political uncertainty and Bank of England surprise move of leaving interest rates unchanged were the main drivers for global currencies last week.
Dated 17 Jul 2016
By Ketan Verma
Fickle bond markets want Rate Cut from the New Governor but that could be trouble ahead
Government bond yields fell sharply last week in anticipation of the government announcing a new RBI governor to replace Dr. Raghuram Rajan, who is not taking up a second term.
Dated 16 Jul 2016
By Arjun Parthasarathy
Bond Markets in Bull Run – 7% on 10 year Gsec on Cards
Bond yields fell sharply last week flattening the 10 over 30 segment of the government bond yield curve.
Dated 2 Jul 2016
By Arjun Parthasarathy
RBI is aggressively adding liquidity through OMOs
RBI has announced an OMO bond purchase auction for Rs 150 billion scheduled for the 31st of May 2016.
Dated 28 May 2016
By Arjun Parthasarathy
RBI will have to Increase OMO Size and Frequency
RBI has bought Rs 400 billion of bonds through three OMO purchase auctions since the beginning of April 2016 and will now have to step up its purchases if it has to fulfill its stated aim of bringing down liquidity to neutral territory.
Dated 21 May 2016
By Arjun Parthasarathy
SDL’s could see selective derating as States plunder coffers for election freebies
State Development Loans (SDL’s) have been largely viewed as risk free by markets on the back of RBI managing their borrowing and both the central bank and the government providing overdraft facilities to meet financial obligations.
Dated 8 May 2016
By Arjun Parthasarathy
RBI has a lot of work to do on Liquidity
The government that carried a surplus of Rs 1500 billion into April 2016 has spent its entire surplus and its cash position stands at just around Rs 20 billion as of 22nd April. Government spending its surplus has infused funds into the system improving liquidity conditions.
Dated 23 Apr 2016
By Arjun Parthasarathy
IMF Warnings Weaken Currency Market Sentiments
USD last week was volatile amid weak market sentiments after IMF warning signals.
Dated 17 Apr 2016
By Ketan Verma
One Year OIS to One Year CD Spread is Extremely Attractive
The spread between the one year OIS (Overnight Index Swap) yield and the one year Bank CD (Certificate of Deposit) yield is extremely attractive and bond markets will look to lower this spread considerably over the next two weeks.
Dated 27 Mar 2016
By Arjun Parthasarathy
Yen bears the brunt of Fed policy
Global central banks effort to depreciate their currencies seems to be failing.
Dated 20 Mar 2016
By Ketan Verma
Central Government Debt Management – Markets and Nominal GDP Growth are Determining the Strategy
The sharp rise in public debt since 2008-09 has increased focus on debt management strategy of the government as market borrowings in the form of dated government securities and treasury bills constitute around 85% of public debt.
Dated 23 Feb 2016
By Arjun Parthasarathy
Yen Rallies as markets Unwind Short Yen Positions
Japanese Yen last week, appreciated by 3.2% against the USD and is currently trading at JPY 113.25, which is below October 2014 levels when the BoJ shocked the markets with a ultra loose monetary policy in order to boost inflation.
Dated 14 Feb 2016
By Ketan Verma
Government Repurchased Rs 166 billion of G-sec
On 4th February government of India repurchased Rs 166.49 billion of bonds.Total bids were Rs 533.53 billion.
Dated 4 Feb 2016
By Arjun Parthasarathy
USD to Remain Stable at Higher Levels
Fed raised its benchmark rate by 25bps in its meeting that ended on the 16th of December 2015.
Dated 20 Dec 2015
By Ketan Verma
Will the INR Shrug off Fed Rate Hike?
Indian Rupee depreciated by 0.15% against USD but appreciated by 1.12% against Euro last week.
Dated 22 Nov 2015
By Ketan Verma
USD to Stay Strong on ECB, PBOC Moves
USD gained last week and touched two month high levels.
Dated 25 Oct 2015
By Ketan Verma
Weak Monthly Job Report is Positive for INR
The INR is set to gain on the back of expected FII flows into equites and bonds.
Dated 4 Oct 2015
By Ketan Verma
INR to Gain on USD Rally Faltering
USD declined last week due to mixed U.S. economic data and weak US non-farm payroll report.
Dated 5 Apr 2015
By Ketan Verma
Asian Currencies Gain on Fed’s Dovish Stance but Gains may be Short-Lived
Asian currencies this week were majorly up after weak U.S. economic data and on Fed’s dovish statement but the gains are expected to be short-lived as the Fed sticks to its plan to raise interest rates.
Dated 22 Mar 2015
By Ketan Verma
Strong Building up of Policy Divergence Hits Hard on Global Currencies
Asian currencies this week also were under pressure due to building up of policy divergence as US labour market is on a strong recovery path making a very strong case for the Fed to hike rates sooner than expected.
Dated 15 Mar 2015
By Ketan Verma
USD Rally to Gain Momentum
USD rallied last week and is expected to strengthen further on strong February monthly US job report, which is indicating a healthy and continuous recovery in US labour markets and is making a strong case for Federal Reserve to hike rates sooner than later.
Dated 8 Mar 2015
By Ketan Verma
INR will see Stability on Budget 2015 even as USD Surges against Majors
Indian Rupee advanced to its best level in two-weeks against the USD after Federal Reserve Chairperson Janet Yellen suggested that an US interest rate rise is not likely to occur for some time yet.
Dated 1 Mar 2015
By Ketan Verma
Will FIIs sell INR Bonds?
FIIs have invested around USD 20 billion in INR Bonds in the April-December 2014 period.
Dated 20 Dec 2014
By Arjun Parthasarathy
8.40% 2024 bond at 7.50% by end December 2014
The benchmark ten year government bond, the 8.40% 2024 bond could well end the calendar year 2014 at levels of 7.50%.
Dated 14 Dec 2014
By Arjun Parthasarathy
Expect 25bps Repo Rate Cuton 2nd December 2014
RBI is likely to deliver 25bps Repo Rate cut on the 2nd of December 2014 policy review.
Dated 29 Nov 2014
By Arjun Parthasarathy
Will the 8.40% 2024 Bond follow the Global Ten Year Bond Rally?
Ten year bond yields have fallen sharply from the US to Germany over the last one month.
Dated 31 Aug 2014
By Arjun Parthasarathy
India’s subsidy bill is likely to be well below budget estimates, positive for bonds
India’s subsidy bill could be well below Budget 2014 estimates of Rs 2478 billion on the back of stable crude oil prices, pass through of diesel prices to the end user and expected cut in food subsidies on FCI reforms.
Dated 24 Aug 2014
By Arjun Parthasarathy
RBI confuses bond markets prior to policy review on 5th August 2014
Bond market is confused by RBI actions on auctions, bond sales and liquidity.
Dated 2 Aug 2014
By Arjun Parthasarathy
RBI 3rd June Policy Review and Bullish Bond Markets, What Gives?
Bond markets are distinctly going bullish into the 3rd June 2014 RBI policy review. The auction of the new 14 year bond on the 30th of May saw cut off coming in at 8.60%, below levels of 8.74% traded in the when issued market.
Dated 31 May 2014
By Arjun Parthasarathy
Five year OIS yield indicates potential fall in government bond yields
The five year OIS (Overnight Index Swaps) yield closed last week at four month lows of 8.24%.
Dated 24 May 2014
By Arjun Parthasarathy
Unfulfilled auction demand will bring down bond yields
The redemption of Rs 407 billion of 7.37% 2014 bond on the 16th of April and the Rs 1970 billion of deposits raised by banks in the last fortnight of March 2014 has led to higher demand for government bonds in the market.
Dated 18 Apr 2014
By Arjun Parthasarathy
Liquidity to steepen the yield curve
The bond market will eye liquidity conditions in April to take a view on structural changes in the bond yield curves.
Dated 5 Apr 2014
By Arjun Parthasarathy
Bond market shoring up on short maturity corporate bonds ahead of April liquidity
Corporate bond yields at the short end of the yield curve fell sharply last week as the market bought into attractive yields at higher levels in anticipation of good system liquidity in April 2014.
Dated 22 Mar 2014
By Arjun Parthasarathy
Bond markets cold to INR and Equity rally
Bond traders are not loudly cheering the strength in the INR and the record high levels in the Sensex and Nifty.
Dated 8 Mar 2014
By Arjun Parthasarathy
Repo or MSF, which is the operational rate at present?
The bond market is confused on the intentions of the RBI. The central bank’s official stance is that the Repo is the operational rate for the market but its actions suggest that its holding rates in the Repo-MSF corridor.
Dated 22 Feb 2014
By Arjun Parthasarathy
RBI could cut CRR on 28th January 2014
RBI could cut the CRR (Cash Reserve Ratio) in its 28th January 2014 policy review to provide liquidity to the banking system.
Dated 25 Jan 2014
By Arjun Parthasarathy
OMO and Fiscal Deficit Numbers to push down bond yields
The positive sentiment in bond markets that has taken down bond yields by 30bps since the beginning of calendar year 2014 is set to continue on the back of RBI OMO bond purchase auctions and the government looking to lower full year budgeted borrowing by Rs 150 billion.
Dated 18 Jan 2014
By Arjun Parthasarathy
Ten year bond will rally on the back of bond positive data
Bond yields are likely to come off on the back of bond positive economic data.
Dated 11 Jan 2014
By Arjun Parthasarathy
Cheer up bond markets – Your nervousness is overdone
Bond markets are going into New Year 2014 on a nervous note with yield curves shifting higher across segments.
Dated 28 Dec 2013
By Arjun Parthasarathy
Where is the Juice in the Market?
There is heavy congestion in yields in the 9.20% to 9.60% band.
Dated 21 Dec 2013
By Arjun Parthasarathy
RBI Rate Hike Will Be Positive For Markets But More Hurdles To Cross
The bond market has to cross many hurdles before it can establish a firm footing.
Dated 14 Dec 2013
By Arjun Parthasarathy
What can happen post 18th December 2013?
The date 18th December 2013 has attained high significance for bond markets.
Dated 7 Dec 2013
By Arjun Parthasarathy
Four factors bond markets will watch out for in November
The bond market is going into Diwali 2013 on a pessimistic note.
Dated 1 Nov 2013
By Arjun Parthasarathy
Liquidity conditions will make RBI put off repo rate hike
RBI cut the MSF rate by 50bps, held an Rs 10,000 crores OMO (Open Market Operation) purchase auction and infused Rs 19,000 crores through 7 day term repo auctions at 8.80% to ease system liquidity and bring down rates at the short end of the yield curve.
Dated 12 Oct 2013
By Arjun Parthasarathy
Bond Market waiting for Fed, RBI and New Issues
The improved outlook on the INR did not filter down to bond yields coming off as the market is waiting for the events of Fed FOMC meet and RBI policy review to pass before taking fresh directional positions on bonds.
Dated 14 Sept 2013
By Arjun Parthasarathy
No Respite for Bonds Despite Weak GDP Growth
Bond market will not be too enthusiastic on taking down bond yields despite GDP growth for the first quarter of fiscal 2013-14 coming in at levels of 4.4%, well below official forecast growth levels of 5.5% for the full year.
Dated 1 Sept 2013
By Arjun Parthasarathy
Bond yields to move in tandem with INR
Bond market is trading the INR not directly but indirectly through government bonds.
Dated 3 Aug 2013
By Arjun Parthasarathy
Bond Yields to come off Post 30th July Policy Review
The bond market will go into the 30th July RBI policy review on a hopeful note.
Dated 27 Jul 2013
By Arjun Parthasarathy
Bond Yields will Trend Higher before Coming Off
Bond markets had the strongest bout of volatility in over four and half years last week.
Dated 20 Jul 2013
By Arjun Parthasarathy
US Pay roll Numbers to Keep the Bond Market Nervous
The better than expected June 2013 job numbers in the US took up ten year US treasury yields by 20bps.
Dated 6 Jul 2013
By Arjun Parthasarathy
Gas Price Hike is Positive for the Bond Market
The government approved doubling of domestic gas prices last week and this is largely positive for the bond market.
Dated 30 Jun 2013
By Arjun Parthasarathy
INR Bonds – Use this Correction to go Long
The auction cut off on the benchmark ten year government bond, the 7.16% 2023 bond, came in at 7.28% levels.
Dated 2 Jun 2013
By Arjun Parthasarathy
Bond Market Will Have To Realign The GOI Yield Curve
The cut-off on the new ten year benchmark government bond was aggressive at 7.16%.
Dated 19 May 2013
By Arjun Parthasarathy
Bond Markets are on RBI Lit Fire
Bonds markets had one of its best weeks in a long while with sharp fall in bond yields across the curve amidst record high volumes.
Dated 13 May 2013
By Arjun Parthasarathy
New Ten Year Bond Yield Cut Off Will Come in at 7.60%
The bond market is anxiously waiting for the government to announce an issue of a new ten year bond.
Dated 5 May 2013
By Arjun Parthasarathy
Liquidity is no Longer an Issue for the Market
The outlook for liquidity is turning positive and this bodes well for interest rates at the short end of the yield curve. Liquidity conditions are improving on the back of factors such as strong growth in bank deposits and falling trade deficit.
Dated 21 Apr 2013
By Arjun Parthasarathy
Ten Year Government Bond Yield Heading to 8%
The government bond market is going into the new fiscal year staring 1st April 2013 on a bearish note.
Dated 25 Mar 2013
By Arjun Parthasarathy
Bond markets are positioning for a rate cut on the 19th of March
The RBI is expected to cut the benchmark policy rate the repo rate by 25bps in its mid term policy review on the 19th of March. Bond markets are starting to factor in the 25bps repo rate cut in bond yields.
Dated 10 Mar 2013
By Arjun Parthasarathy
Bond market eyeing government borrowing for fiscal 2013-14
The bond market will take direction from the government borrowing numbers for fiscal 2013-14. The FM will release the gross and net government borrowing numbers for fiscal 2013-14 in the budget presentation on the 28thof February 2013.
Dated 25 Feb 2013
By Arjun Parthasarathy
Bond yields will fall only if there is a 50bps repo rate cut
Bond market has largely factored in a 25bps repo rate cut in the RBI policy meet on the 29th of January 2013. Ten year benchmark bond yields are down 22bps month to date on rate cut expectations and on improved sentiment on government finances post fuel price decontrol.
Dated 26 Jan 2013
By Arjun Parthasarathy
Bond rally has more steam left
Bond market started off 2013 with a bang with rallies in government bonds and corporate bonds.
Dated 6 Jan 2013
By Arjun Parthasarathy
OMOs and falling bond supply to pull down bond yields
Liquidity tightened considerably last week with the market borrowing from RBI crossing Rs 170,000 crores.
Dated 21 Dec 2012
By Arjun Parthasarathy
Data positive for bonds but deficit, liquidity and Rupee will deter rally
Bond markets will have to weigh positives of poor IIP and export growth data and lower inflation data with negatives of higher fiscal deficit, tight liquidity conditions and a weakening Rupee for determining the direction of bond yields.
Dated 18 Nov 2012
By Arjun Parthasarathy
25 or 50, Repoor CRR? 50bps Repo rate cut is more likely
RBI last cut repo rate in April 2012, where the repo rate was cut by 50bps.
Dated 26 Oct 2012
By Arjun Parthasarathy
Bullish auction cut offs will push down government bond yields
The Rs 13,000 crores government bond auction held on Friday the 19th of October saw strong bidding for bonds in the auction by market participants leading to cut offs coming in better than expected.
Dated 21 Oct 2012
By Arjun Parthasarathy
Bond market not yet convinced of a rally
The government bond market failed to embrace positive talk on policy rate cuts by the RBI.