HALISTER1: India RBI Cash Stance Likely to Push India Yields Lower: Nomura

India RBI Cash Stance Likely to Push India Yields Lower: Nomura

(Bloomberg) -- RBI’s OMO purchase amid large liquidity surplus suggests the central bank is differentiating between short-term and durable liquidity, Vivek Rajpal and Prashant Pande, Singapore-based strategists at Nomura write in note.
  • RBI appears more focused on providing longer-term liquidity
  • RBI’s refined cash management is ensuring that fixings remain close to repo rate despite surplus cash
  • NOTE: System cash surplus around ~960b rupees while overnight fixing today at 6.50%
  • RBI is now focused on the quantity of money, even while controlling price of money
  • Central bank is taking a proactive approach ahead of non- resident deposit outflows
  • Expects spread compression between off-the-run and on-the- run bonds as better liquidity feeds into yield-chasing by local investors
  • Long bond positions include 7.72% 2025, 7.68% 2023 and 8.27% 2020; sees value in adding position in 7.72% 2025 bond
  • Extending long bond positions further down yield curve since June; gradually shifting from offshore swaps to bonds as RBI’s focus remains on liquidity than rate cuts
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

People
Prashant Pande (Nomura Holdings Inc)
Vivek Rajpal (Nomura Holdings Inc)

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