Ten-year yield to be in 8.25-8.40% range, says SP Prabhu, Head Of Debt Funds, IDBI Federal Life Insurance
We expect the 10-year yield to be in 8.25-8.40% range during the week. Liquidity is expected to tighten during the next two weeks on account of outflows because of advance tax payments.
Updated:
SP Prabhu
Head Of Debt Funds
IDBI Federal Life Insurance
RBI is faced with a challenge of designing monetary policy in a paradoxical situation of sustained inflationary pressures, coupled with deteriorating global economic environment. The recent easing of crude prices is being offset by rising food prices and elevated levels of core inflation.
The bleak macro-economic indicators coming out of the US and inability of European Union to address the debilitating fiscal situation threatens to bring about disruptions in the financial markets and push the world economy into a recession. We expect the central bank to pause its rate hike cycle in its forthcoming Monetary Policy Review.
India's fiscal deficit is expected to overshoot on account of under-provision of subsidies in the Budget. The possibility of unscheduled additional borrowings during this month cannot be ruled out. The Rs 4,450- crore state development loan auction and the Rs 11,000-crore government securities auction scheduled this week are expected to go through.
Traders are expected to be cautious ahead of the monetary policy announcement. We expect the 10-year yield to be in 8.25-8.40% range during the week. Liquidity is expected to tighten during the next two weeks on account of outflows because of advance tax payments.
We expect the advance tax outflows to be over Rs 50,000 crore and consequently the borrowing under the LAF Repo window is expected to increase substantially. Call money rate is expected to be above 8.00%.
Mutual Funds may face redemption pressure on their money market funds due to redemption by banks on account of liquidity pressures and by corporates to fund their advance tax payouts.
We expect active CD issuance by banks in view of tighter liquidity conditions and CD rates may harden by 10-20 bps.
Head Of Debt Funds
IDBI Federal Life Insurance
RBI is faced with a challenge of designing monetary policy in a paradoxical situation of sustained inflationary pressures, coupled with deteriorating global economic environment. The recent easing of crude prices is being offset by rising food prices and elevated levels of core inflation.
The bleak macro-economic indicators coming out of the US and inability of European Union to address the debilitating fiscal situation threatens to bring about disruptions in the financial markets and push the world economy into a recession. We expect the central bank to pause its rate hike cycle in its forthcoming Monetary Policy Review.
India's fiscal deficit is expected to overshoot on account of under-provision of subsidies in the Budget. The possibility of unscheduled additional borrowings during this month cannot be ruled out. The Rs 4,450- crore state development loan auction and the Rs 11,000-crore government securities auction scheduled this week are expected to go through.
Traders are expected to be cautious ahead of the monetary policy announcement. We expect the 10-year yield to be in 8.25-8.40% range during the week. Liquidity is expected to tighten during the next two weeks on account of outflows because of advance tax payments.
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We expect the advance tax outflows to be over Rs 50,000 crore and consequently the borrowing under the LAF Repo window is expected to increase substantially. Call money rate is expected to be above 8.00%.
Mutual Funds may face redemption pressure on their money market funds due to redemption by banks on account of liquidity pressures and by corporates to fund their advance tax payouts.
We expect active CD issuance by banks in view of tighter liquidity conditions and CD rates may harden by 10-20 bps.
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