RBI announcements shake up the markets

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Participants in the Government Securities Market (G-Sec) were disappointed with the decision of the Reserve Bank of India to halt the purchase of G-Sec through the G-Sec Acquisition Program (G-SAP ), leading to lower prices for G-Sec. and an increase in their yields.

The yield of the benchmark G-Sec 10-year index (coupon rate: 6.10%) increased by 5 basis points and its price fell 36 paise to close at 6.3178% and 98.42 , respectively, compared to the previous close.

Bond yields and prices are inversely correlated and move in opposite directions.

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Rising Brent crude oil prices and its possible inflationary effect on the economy reinforced negative sentiment in the bond market.

Knee kick

“In what is seen as a signal to decrease, the RBI has suspended the bond buying program, ie the G-Sec acquisition program (G-SAP). There was an instinctive surge in G-Sec yields, especially long yields, before leveling off.

“Compared to a few of the high-yield countries in the region, India’s recovery from the delta hit has been stronger, which has allowed the RBI to tolerate higher rates and returns over the course of the year. the next few months, as the rise in oil prices intensifies, ”said Radhika Rao, economist, DBS Grouper.

Rao observed that the generic 10-year yield has risen 25 basis points since mid-2021, while the 2-year yield has stopped falling and has been rising since September.

“We hope that yields will increase further by the end of the year,” she said.

Weaker rupee

Meanwhile, the rupee closed 20 paise lower at 74.99 per dollar against the previous close of 74.79 as Brent crude oil broke above $ 83 per barrel.

The Rupee opened at 75.0050 per dollar. Intraday, it tested a high of 74.9150 and a low of 75.1600.

IFA Global, in a report, said the Indian rupee traded higher but recovered some losses against the dollar and stabilized in the last session because sentiment for the currency improved after RBI Governor Shaktikanta Das announced that the MPC decided to maintain the accommodative policy. .

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“The Indian currency was also supported by a rise in national benchmark stock indexes.

“All eyes are now on key US non-farm payroll data, due for release later today, which may provide further insight into the timing of the US Federal Reserve’s next moves. to reduce its massive monthly asset purchases, ”the report said. .


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