HALISTER1: Indian Long Bonds, Swaps to Adjust More on RBI Rhetoric: Citi

Indian Long Bonds, Swaps to Adjust More on RBI Rhetoric: Citi

(Bloomberg) -- RBI’s hawkish rhetoric relative to market expectations will likely prevent Indian rates from pricing in a rate cut anytime soon, Citi analysts including Gaurav Garg write in note dated Wednesday.
  • Heavy positioning in OIS receivers and long bonds is likely to adjust further; long-tenor bonds may also be hit by issuance of cash management bills that are eligible for statutory liquidity ratio
  • Medium-term fundamentals remain supportive of fixed income but wouldn’t build outright receiver/long duration position just yet
  • INR may get negatively impacted via disappointment of equities at unchanged rates and broad USD strength; moreover, RBI may not be averse to orderly weakening of INR
  • NOTE: Yield on 10-year govt bond up 3bps to 6.44%, adding to 21bps rise on Wednesday after RBI’s surprise decision to hold rates
  • USD/INR down 0.3% to 67.4525
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

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Gaurav Garg (Citigroup Inc)

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