Halister News

(Bloomberg) -- Yield curve is likely to bull steepen as the central bank shifts from bond buybacks to monetary easing, HSBC strategist Himanshu Malik writes in note.

• Temporary shortage of cash will probably be disinflationary and drag on economic growth; should encourage RBI to cut rates
• More bullish on front-end of yield curve; receive 1-yr 1-yr NDOIS tactically to position for further RBI easing
• RBI unlikely to conduct open market operation purchases of bonds in 2017 with liquidity deficit in banking system close to neutrality or slightly in surplus
• Profit taken on long 10-year bond recommendation
• Recommend buying 5-year govt bonds
  • 10-year bond yields to decline to 6% by end-2017, 5-year yields likely to decline more significantly to 5.3%
• NOTE: 10-year yield down 3bps at 6.29%, 5-year steady at 6.25%