RBI Headquarters in Mumbai
RBI Headquarters in Mumbai | Photo: Shashank Parade | PTI
Text Size:

Mumbai/Hong Kong: India’s central bank, the most aggressive among its Asian peers in slashing borrowing costs in 2019, may be done with easing, swap markets show.

One-year interest-rate swaps surged 27 basis points to a four-month high of 5.29% on Dec. 6 after the Reserve Bank of India shocked the market by keeping rates unchanged after cutting five times this year. Swaps, which were pricing in 25-40 basis points of reductions before the policy decision, are signaling a pause, according to DBS Bank Ltd.

“The market is a bit taken aback by the RBI’s shock hold and that’s getting reflected in the swaps pricing-out any more rate cuts,” said Eugene Leow, a fixed-income strategist in DBS Bank in Singapore. “Market participants are now focusing on inflationary pressures and fiscal slippage.”

The yield on benchmark bonds surged 20 basis points over Thursday and Friday after the RBI raised its inflation forecast. Consumer price index probably rose 5.26% in November from a 4.6% gain in October, according to a Bloomberg survey before data due Thursday.

Besides vanishing rate-cut support, volatile oil prices and higher U.S. Treasury yields will weigh on Indian bonds, according to ICICI Securities Primary Dealership Ltd. The absence of bond purchases by the RBI and speculation that the authority may be selling short-end bonds has also dented sentiment.

“Every incremental news coming in is bond-negative,” said Naveen Singh, head of fixed-income trading at in Mumbai at ICICI Securities. “Either we are in a very long pause, or over a period of time if we see any green shoots, the market may even start to price in the possibility of rate hikes in the second half of 2020.” – Bloomberg


Also read: Indians want govts to be run like corporations, but this is why a country is not a company


 

Subscribe to our channels on YouTube & Telegram

News media is in a crisis & only you can fix it

You are reading this because you value good, intelligent and objective journalism. We thank you for your time and your trust.

You also know that the news media is facing an unprecedented crisis. It is likely that you are also hearing of the brutal layoffs and pay-cuts hitting the industry. There are many reasons why the media’s economics is broken. But a big one is that good people are not yet paying enough for good journalism.

We have a newsroom filled with talented young reporters. We also have the country’s most robust editing and fact-checking team, finest news photographers and video professionals. We are building India’s most ambitious and energetic news platform. And we aren’t even three yet.

At ThePrint, we invest in quality journalists. We pay them fairly and on time even in this difficult period. As you may have noticed, we do not flinch from spending whatever it takes to make sure our reporters reach where the story is. Our stellar coronavirus coverage is a good example. You can check some of it here.

This comes with a sizable cost. For us to continue bringing quality journalism, we need readers like you to pay for it. Because the advertising market is broken too.

If you think we deserve your support, do join us in this endeavour to strengthen fair, free, courageous, and questioning journalism, please click on the link below. Your support will define our journalism, and ThePrint’s future. It will take just a few seconds of your time.

Support Our Journalism

Share Your Views

LEAVE A REPLY

Please enter your comment!
Please enter your name here