RBI Policy
The outcomes of RBI MPC will keep yield curve from flat to inverted
The central bank has maintained status quo on policy rates as per market expectation. The current flat to inverted shape of g-sec yield curve will continue by the effect of MPC outcomes and liquidity condition .
Dated 6 Oct 2023
By Subhasis Mishra
Expect sharper rate hikes as INR touches Rs 85-RBI MPC Review-30th Sep 2022
RBI rate hike of 50bps is not enough to stem currency market volatility that is reeling under a global crisis in bonds caused by inflation and ultra-low yields kept by central banks. Markets will sell INR and test RBIs resolve to support the currency.
Dated 30 Sept 2022
By Arjun Parthasarathy
G-sec yield to hit 8% on RBI policy-RBI MPC Review-August 2022
RBI hiked repo rate by 50 bps as per market expectation leaving room for another 50bps hike in next policy meeting. Driven by high inflation and rate hike, government bond yield is likely to touch 8% in coming days.
Dated 5 Aug 2022
By Subhasis Mishra
RBI hikes rates but no one knows it
Policy repo rate kept unchanged at 4% while the reverse repo rate also remained unchanged at 3.35%
Dated 10 Feb 2022
By Arjun Parthasarathy
RBI urges money out of safety to risk assets – Policy review 8th December 2021
RBI sounded out higher inflation, global central banks removing accommodation, healthier growth outlook but kept its own policy easy with ultra-low rates and high liquidity. This forces money out of safe low yielding assets to higher risk and higher return assets.
Dated 8 Dec 2021
By Arjun Parthasarathy
G-secs offer no attraction to traders – RBI 6th Aug 2021 policy review
RBI in its policy review on 6th August 2021 said it wants more trading in bonds but the market will not be allowed to determine yields. Bond traders who make markets have nothing to play for, as both direction and volatility is kept on a tight leash.
Dated 6 Aug 2021
By Arjun Parthasarathy
Corporate bonds to party as RBI opens floodgates on liquidity
RBI is buying government bonds worth Rs 2.2 trillion in the first half of fiscal 2021-22 and is actively buying USD, adding more liquidity in the system. Corporate bonds, especially high yield bonds will see strong demand as investors search for yields
Dated 4 Jun 2021
By Arjun Parthasarathy
CRR hike is baby step towards repo rate hike-RBI policy review Feb-21
RBI is showing its concern on high liquidity, high fiscal deficit and rising equity prices by taking baby steps towards liquidity management. The CRR hike is the first step and more will follow in coming policy meets including repo rate hikes.
Dated 5 Feb 2021
By Arjun Parthasarathy
RBI Increases Risk in Buying Long Duration Bonds –RBI October 20 Policy Analysis
Long duration bonds can be risky while short-duration bonds can protect investors from rising interest rates going forward. However, yields on short-duration bonds are extremely low and gives returns below inflation rate. Investors should search for yields smartly.
Dated 9 Oct 2020
By Arjun Parthasarathy
Buy into INR and Credit Spreads on Low Rates, High Liquidity - August 2020
RBI signaled continued policy accommodation as it forecast negative GDP growth for this fiscal year. The repo rate was held steady at 4% with guidance that there is room to cut if required.
Dated 3 Oct 2020
By Arjun Parthasarathy
RBI Rate Cut May 2020 – Good for Government Bonds, AAA PSU Bonds No Relief for Credit Markets
RBI cut rates by 40bps to bring the repo rate to record lows of 4% and reverse repo rate to 3.35%. The central bank guided for more actions if necessary to protect the financial system and markets.
Dated 10 Sept 2020
By Arjun Parthasarathy
RBI Dividend of Rs 1.76 trillion Will Only Temporarily Calm Fears of Excess Bond Supply
Bond market fears of higher than budgeted government borrowing due to higher spending amid revenue shortfall should temporarily calm markets that were worried about excess bond supply.
Dated 27 Aug 2019
By Arjun Parthasarathy
Rate Cuts but Credit Stress Remains – RBI Policy Review 7th August 2019
Rate cuts, accommodative stance and easy liquidity have not filtered into the credit markets with spreads for all issuers except for select PSU and private issuers at highly elevated levels.
Dated 7 Aug 2019
By Arjun Parthasarathy
G -secs to Shine while Credit Markets Bleed- RBI June 2019 Policy Review
The cut in Repo Rate by 25bps and change in policy stance from neutral to accommodative was expected by the market. Inflation projections are largely benign while there is concern on growth, prompting the accommodative stance.
Dated 6 Jun 2019
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.
Dated 6 Jun 2018
By Arjun Parthasarathy
Dovish RBI Policy, Hawkish Minutes Rattles the Bond Market
The 2 month yield movement in the 10 year benchmark bond , the 7.17% 2028 bond is a literal see-saw.
Dated 20 Apr 2018
By Arjun Parthasarathy
10 year Gsec yields Spike on RBI Signals Withdrawal of Accommodation
India 10-year G-sec bond yields rose to 7.25%,(Chart 1) after the release of RBI minutes, which indicates rate cut cycle has come to an end, most members of RBI committee are worried about the fresh risk of inflation.
Dated 21 Dec 2017
By Arjun Parthasarathy
10 year Gsec yield can rise to 7% on policy - RBI October 2017 Policy Review
RBI has effectively sent out a bearish signal for the 10 year gsec and yields could rise to 7% from current levels of 6.70%. The benchmark 10 year gsec, the 6.79% 2027 gsec saw yields rise by 7bps post policy on hawkish signals by the RBI.
Dated 4 Oct 2017
By Arjun Parthasarathy
Lower Dividend from RBI Would Lead to Rate Cuts
RBI is paying the price of demonetization through lower surplus due to cost of sterilizing liquidity.
Dated 12 Aug 2017
By Arjun Parthasarathy
RBI turns Neutral – What does it mean for Markets and Your Investments?
RBI in its two day policy meet held on the 7th and 8th of February, released the decision of the MPC (Monetary Policy Committee) on the 8th of February and the verdict was policy rates being kept status quo and the policy stance turning neutral from accommodative.
Dated 8 Feb 2017
By Arjun Parthasarathy
Can the Government Expect Rs 1.5 trillion as Dividend from RBI on Demonetisation?
The government passed an ordinance today on demonetisation of Rs 500 and Rs 1000 notes and effectively removed the liability of the government and RBI on the notes after 31st of March 2017.
Dated 28 Dec 2016
By Arjun Parthasarathy
25bps Direct, 50bps Indirect Rate Cut, Total 75bps Rate Cut – Highly Bullish for Markets
RBI cut the Repo Rate by 25bps in its first Bi-Monthly Policy Statement today on the 5th of April 2016. RBI has also indirectly cut policy rates by 50bps through two measures.
Dated 5 Apr 2016
By Arjun Parthasarathy
No more Rate Cuts on 7th Pay Commission Implementation – RBI 2nd February 2016 Policy Review
Bond yields rose post policy on rate cut hopes going out of the market with ten year benchmark bond yields rising by 4bps. INR fell and Sensex and Nifty gave up early pre policy gains.
Dated 2 Feb 2016
By Arjun Parthasarathy
Big Bang Rate Cut by RBI- Highly Positive for Markets, especially Bond Markets – RBI Policy Review 29th September 2015
Indian bond and equity markets received a pleasant surprise today with RBI governor Dr. Raghuram Rajan announcing a 50bps rate cut from levels of 7.25% to 6.75%.
Dated 29 Sept 2015
By Arjun Parthasarathy
Five Reasons Why RBI has not cut CRR since last 13 policy reviews
In the 2nd June 2015 RBI policy review, the Central Bank kept the Cash Reserve Ratio (CRR) of scheduled commercial banks unchanged at 4% of Net Demand and Time Liabilities (NDTL). RBI has kept CRR rate unchanged at 4% for the last 13 policy reviews.
Dated 4 Jun 2015
By Arjun Parthasarathy
RBI 7th April 2015 Policy – Nothing in it for Duration, Short End of the Curve a Better Bet at the Current Juncture
Bond markets will not have any strong reason to pull down yields at the longer end of the government bond curve given that rate cut expectations will start firming up closer to June policy review (if data is positive for rate cuts).
Dated 7 Apr 2015
By Arjun Parthasarathy
SLR cut – Question of Borrowing Absorption Arises – Expect Long Bond Yields to rise in Near Term, INR to stay stable and Sensex, Nifty to be volatile.
RBI did not cut the repo rate as expected in its policy review today (3rd February 2015) but instead cut the SLR (Statutory Liquidity Ratio) by 50bps to enable banks to lend to the economy.
Dated 3 Feb 2015
By Arjun Parthasarathy
Rate Cuts, will be Rolled Out Every Policy Review Starting February 2015 or Even Earlier –RBI 2nd December 2014 Policy Review
RBI, while holding on to policy rates in its 2nd December 2014 policy review, has guided markets towards a change in policy stance from neutral to accommodative.
Dated 2 Dec 2014
By Arjun Parthasarathy
Why is RBI Selling bonds from its books?
The bond market has got used to RBI buying bonds through OMOs (Open Market Operations) over the last six years.
Dated 6 Aug 2014
By Arjun Parthasarathy
SLR cut indicates RBIs growing confidence in Government Fiscal Consolidation Intent– PositiveforBonds
RBI cut the SLR (Statutory Liquidity Ratio) of banks by 50bps in its policy review on 5th of August 2014. Apart from this there was no change in policy rates on Repo and CRR (Cash Reserve Ratio) that were maintained at 8% and 4% respectively.
Dated 5 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
Rupee at above Rs 60 – Should RBI buy US Dollars?
India requires to shore up its reserves but the cost of shoring it up is high.
Dated 28 Mar 2014
By Arjun Parthasarathy
How FIIs are Making Money from RBI Tight Money Policy
FIIs have bought USD 5.56 billion worth of Rupee bonds calendar year 2014 to date (as of 7th March 2014).
Dated 11 Mar 2014
By Arjun Parthasarathy
RBI Has Formally Adopted An Inflation Target – Positive for Bonds, Rupee and Equities in the Long Term
RBI raised the repo rate by 25bps in its policy review today.
Dated 28 Jan 2014
By Arjun Parthasarathy
RBI 28th January 2014 Policy Review will Focus on Liquidity Management – Positive for Bond/ Bond Fund Investors
RBI’s third quarter review of the annual 2013-14 monetary policy scheduled for the 28th of January 2014 will not see any changes to key policy rates of CRR and Repo.
Dated 21 Jan 2014
By Arjun Parthasarathy
RBI December 2013 Policy Review – Positive surprise and if Fed is a non event, record highs on Sensex and Nifty and sharprise in Rupee is well on cards
The whole market was expecting a 25 bps repo rate hike by the RBI in its policy review today but was (un) pleasantly surprised when the central bank refrained from a rate hike.
Dated 18 Dec 2013
By Arjun Parthasarathy
RBI 29th October Policy Review – The yield curve will align to a 7.75% to 8.75% rate corridor
Money market rates will move in a 7.75% to 8.75% range over the next couple of months and this will align government bond, corporate bond and interest rate swap curves accordingly.
Dated 29 Oct 2013
By Arjun Parthasarathy
Expect more easing on 29th October 2013
We had rightly predicted that RBI would take liquidity easing measures in our weekly fixed income market analysis “High ICDR will force RBI to roll back liquidity measures before 29th October Policy“on 29th September 2013 .
Dated 7 Oct 2013
By Arjun Parthasarathy
RBI is Considering Lowering MSF Rate, Removing Capon LAF and OMO
The RBI released a comforting note to the markets that were worried about absorbing government bond supply on the back of repo rate hike expectations, high overnight money market rates and lack of OMO (Open Market Operations).
Dated 25 Sept 2013
By Arjun Parthasarathy
Bond Market Test for Rajan
The Headline in the Times of India scream “Rs 4000 crores of Gilts Unsold.
Dated 24 Sept 2013
By Arjun Parthasarathy
CMB Auctions to Strangle Liquidity
RBI has announced weekly auctions of Cash Management Bills (CMBs) for Rs 22,000 crores. The auction will be held every Monday starting 12th August 2013. The duration of the CMBs will be announced one day prior to the auction i.e. on Fridays.
Dated 8 Aug 2013
By Arjun Parthasarathy
RBI transfers surplus profit to Government of India
The Reserve Bank’s Central Board on 08th August 2013 approved the transfer of surplus profit to the Government of India amounting to Rs 330.10 billion for the year ended June 30, 2013 as against Rs 160.10 billion for the year ended June 30, 2012.
Dated 8 Aug 2013
By Arjun Parthasarathy
The New RBI Governor – Expecta Conservative but Surprise Approach to Policies
Dr. Raghuram Rajan, a former IMF economist, visiting professor to the World Bank and US Federal Reserve Board and one of the few economists who predicted the 2008 credit crisis will head the Reserve Bank of India.
Dated 6 Aug 2013
By Arjun Parthasarathy
Liquidity Squeeeezeeee to lead to sharp spike in money market rates
RBI has announced additional measures to squeeze system liquidity. Banks can now borrow only 0.5% of their NDTL (Net Demand and Time Liabilities) under the LAF (Liquidity Adjustment Facility) window. The limit of Rs 75,000 crores on repo stands withdrawn.
Dated 23 Jul 2013
By Arjun Parthasarathy
RBI 30th July 2013 Policy Expectations
RBI 30th July 2013 policy review has gained high significance on the back of its actions in the last few days.
Dated 23 Jul 2013
By Arjun Parthasarathy
Why is the Fed determining RBI Monetary Policy?
RBI cited the market perception of the US Federal Reserve (Fed) tapering off its QE (Quantative Easing) program as the reason for FIIs pulling out over USD 7.5 billion out of Indian Debt and Equity markets over the last couple of months.
Dated 22 Jul 2013
By Arjun Parthasarathy
RBI Actions to Curb INR Volatility will take Ten Year to 8 percent
The Finance Minister, Prime Minister and the RBI Governor have collectively decided to take government bond yields higher in order to curb the volatility in the Indian Rupee (INR). RBI has announced measures to stem INR fall that had fallen to record lows of Rs 61.21 in intraday trading last week.
Dated 15 Jul 2013
By Arjun Parthasarathy
The INR will be Key to Policy Rates in the Near Future
RBI kept benchmark policy rates unchanged in its policy review today. The guidance provided by the central bank suggest that apart from growth-inflation trajectory the balance of payment situation will be key to conducting monetary policy in the coming months.
Dated 17 Jun 2013
By Arjun Parthasarathy
RBI 19th March Rate Cut – Bond yield volatility is temporary
Bond markets have nothing to look forward except fresh supply of government bonds starting April 2013. RBI has cut repo rate by 25bps as per market expectations but has indicated that it has low headroom to cut rates further.
Dated 19 Mar 2013
By Arjun Parthasarathy
RBI should go easy on new bank licenses
RBI released an interesting Table in its third quarter 2012-13 monetary policy review. Table 1 shows that PSU banks have been the worst performers in the NPA front and their capital adequacy has actually gone down in the June to September 2012 period.
Dated 6 Feb 2013
By Arjun Parthasarathy
RBI Policy Review 29th January 2013 - What does It mean for liquid and income funds
The months of February and March are typically tight liquidity months for the system. Demand for funds goes up across the system as banks; corporates and the government look to balance their books for the fiscal year end.
Dated 30 Jan 2013
By Arjun Parthasarathy
RBI Policy Review 29th January 2013 - What RBI says and what it means
RBI uses central bank language in its monetary policy communication. The RBI communicates its policy to bankers, economists, analysts, bond traders and fund managers and hence it does not require to bring down communication to the level of a non financial person.
Dated 30 Jan 2013
By Arjun Parthasarathy
RBI Policy Review 29th January 2013 - Why RBI will cut repo by 50bps
RBI is widely expected to cut the repo rate by 25bps in its policy review on the 29th of January 2013. The rate cut will be the first in calendar 2013 and the second in nine months after its last rate cut in the April 2012 policy where it cut rates by 50bps.
Dated 22 Jan 2013
By Arjun Parthasarathy
December rate cut?
RBI has fresh data to chew on when it goes into its December 2012 mid term policy review.
Dated 16 Nov 2012
By Arjun Parthasarathy