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Mint
7 hours ago
- Business
- Mint
India bond investors favour short-end after central banks policy surprise
MUMBAI, June 9 (Reuters) - Indian investors are opting for shorter-duration government bonds and swaps after the central bank cut rates by a surprise 50 basis points and lowered the cash reserve ratio (CRR) for lenders last Friday. The policy support will steepen the yield curve, with short-term rates falling and longer-term rates stabilising or rising, four investors told Reuters on Monday. "We continue to see front-end of the yield curve to be well supported," said A. Prasanna, head of research at ICICI Securities Primary Dealership. Prasanna, however, sees limited scope for a rally in longer-duration bonds as the CRR cut would limit the need for more debt purchases by the Reserve Bank of India (RBI), a tool that would have otherwise lowered long-term yields. Expectations of a steeper curve are being reflected in markets as yields on up to three-year bonds have declined 4-5 bps since Friday, while the 10-year benchmark yield has risen nearly 18 bps from the low hit on that day. The outsized rate cut and surplus liquidity are also pushing shorter-tenor swap rates lower. The one-year OIS swap rate was around 5.45%, while the five-year rate rose to 5.70%, more-than-doubling the spread between the two. "With more liquidity and lower overnight rate fixings, there is still some room for receiving in one-year swap, but long-end should see some paying," said VRC Reddy, treasury head at Karur Vysya Bank. Reflecting the shift in sentiment, most investors now expect the 10-year bond yield to stabilise or rise. Citibank, which held a long position on the 10-year bond, said its conviction level on this trade has reduced due to limited scope for more rate cuts. Dhawal Dalal, president & CIO - fixed income - at Edelweiss MF, has turned "neutral" from "accommodative" on bonds and expects the 10-year yield in the 6.15%-6.25% band. ($1 = 85.6210 Indian rupees) (Reporting by Dharamraj Dhutia; Editing by Sonia Cheema)
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Business Standard
18-05-2025
- Business
- Business Standard
Rupee steady against dollar in 2025, weakens against euro, pound
While the rupee has held its ground against the US dollar in the current calendar year, it has depreciated significantly against the euro and pound. The local currency has weakened by 6.83 per cent and 5.44 per cent against the euro and pound respectively, as both currencies strengthened markedly against the greenback during the period. The unit remained stable against the dollar, with a marginal 0.01 per cent appreciation so far in 2025. The dollar index, which measures the strength of the US dollar against a basket of currencies, has fallen by 7.09 per cent in 2025 so far. On Friday, it settled at 100.79. 'Euro and pound, they appreciated a lot against the dollar because of the trade tariffs,' said V R C Reddy, Head of Treasury at Karur Vysya Bank. 'However, there have been some positive developments and the dollar index is rebounding, and there is optimism around the US and China trade,' he added. Trade developments fuel currency shifts On 8 May, the US and UK signed a trade agreement aimed at deepening economic ties by reducing tariffs and expanding market access. The deal cuts US tariffs on up to 100,000 British car imports annually and removes duties on UK steel and aluminium, while the UK agreed to allow limited, tariff-free imports of US beef and ethanol. The agreement was welcomed by markets, with the British pound appreciating against the greenback as investor sentiment improved on the back of stronger UK export prospects and renewed confidence in the UK economy. However, the dollar saw limited upside, as expectations of Federal Reserve rate cuts continued to weigh on its performance despite the trade breakthrough. 'The dollar is overvalued and there is room for the euro and pound to rise further,' said a market participant. 'If we look at the data, the US Federal Reserve is expected to go for a rate cut, which means the dollar index might again fall below 100,' the person added. Dollar pressured by Fed, investor sentiment In early 2025, Europe's major currencies strengthened significantly against the US dollar, as growing concerns over the US economic outlook prompted investors to shift portfolio allocations towards Europe and the UK. Additionally, the US-China trade truce initially lifted the dollar index, but the optimism quickly faded. Weaker-than-expected US economic data this week reinforced expectations that the Federal Reserve will cut interest rates more than three times this year, pushing the dollar index lower. In a surprise breakthrough, the United States and China agreed on Monday to roll back tariffs on each other's goods for an initial 90-day period — marking a major step toward de-escalating the prolonged trade war and lifting global market sentiment. US Treasury Secretary Scott Bessent announced on Monday that the United States and China had agreed to a 90-day pause on trade measures, following weekend negotiations with Chinese officials in Geneva. The deal includes a mutual reduction of tariffs during this period, offering a temporary reprieve from escalating trade tensions between the world's two largest economies.
Time of India
02-05-2025
- Business
- Time of India
RBI panel suggests longer call money hours, extended repo timings
Tired of too many ads? Remove Ads Tired of too many ads? Remove Ads Popular in Markets A working group formed by the Reserve Bank of India has recommended extending the timing for the call money market by two hours to 7:00 PM amidst changing dynamics on liquidity management with cash withdrawals happening online of funds through the call money market till 7.00 pm will increase reliance on this market, which is regulated by the RBI, experts most banks keep extra cash in case there are sudden outflows because payment systems are operational 24x7. But in the absence of the interbank call money market, they are parking surplus cash in a central bank window – standing deposit facility or SDF, losing out up to a quarter percentage point more that they may have earned lending in the call market instead, ET reported on April to bank treasury officials, the extension of operating hours for the Call Money, TREPS (Tri-party Repo Dealing System), and Market Repo segments has been long-standing demands from market working group, chaired by Radha Shyam Ratho, Executive Director of RBI, also recommended unifying and extending the timings of market repo and TREP trading hours till 4:00 PM. Currently, it closes at 3:00 PM.'This demand has gained renewed urgency following the implementation of RTGS 24x7, which has made it challenging for banks to manage sudden and large fund flows after 5:00 PM. In such situations, banks are often left with no option but to rely on the RBI's MSF (marginal standing facility) or SDF,' said VRC Reddy, head of treasury, Karur Vysya RBI said that final view will be taken on the recommendations made by the working group. The last date for submission of comments is May is an anonymous order matching system facilitating borrowing and lending of funds against government securities. Usually, mutual funds are the lenders in this to the group's report, TREP segment accounts for the largest share in the overnight money market with 69% of daily average volume in the market followed by market repo at 29%.The share of call money has gradually come down from 13% in 2014-15 to about 2% in recent years. Though it is an important barometer because according to the RBI's current policy framework, the central bank aims at aligning the weighted average call rate with the repo working group has recommended maintaining the current timings for the bond and foreign exchange it has recommended permitting post onshore market hours transactions in government securities with non-residents during a time window of 5:00 PM to 11:30 PM. Such transactions must be reported to NDS-OM, an RBI-owned trading platform, on T+1 day between 7:00 AM – 8:30 AM, with settlement on a T+2 Pawar, head of treasury at Ujjivan Small Finance Bank, said that the extension of bond market timing for foreign portfolio investors has been the long pending demand for international banks as it would give easy access to their clients. 'US markets open after the Indian trading timings are over. The working group's proposal would give them the opportunity to take exposure to Indian bonds, especially if some geopolitical event unfolds or some crucial macroeconomic data is out after India market hours,' he said.
Reuters
14-02-2025
- Business
- Reuters
India's RBI to enhance liquidity next week to cover for tax outflows
MUMBAI, Feb 14 (Reuters) - The Reserve Bank of India will step up its liquidity infusion and inject over $16 billion next week into the banking system, which will see large outflows owing to tax payments. The RBI has doubled the quantum of government securities it aims to purchase to 400 billion rupees ($4.61 billion) on a review of current and evolving liquidity conditions. The RBI bought bonds worth 400 billion rupees on Thursday, after an initial announcement it would purchase only 200 billion rupees. "The increase in the quantum was largely expected after a similar action this week," said VRC Reddy, treasury head at Karur Vysya Bank. "We would need OMO purchases of more one trillion rupees till the end of this financial year." For next week's auction, the central bank has also included the benchmark 6.79% 2034 security for this debt purchase. It had bought around 50 billion rupees of this paper in its first debt purchase in January, but did not include it in the second OMO auction. The RBI has infused around 2.68 trillion rupees into the banking system over the last month through a combination of OMO purchases, secondary market debt purchases, dollar/rupee swap and longer duration variable rate repo auctions. It has also been providing funds through daily overnight repos, and adjusting the quantum based on the system's requirement. Nearly two-thirds of these repos have not been fully subscribed, indicating the central bank has been offering funds generally in line or above market requirements. Separately, the RBI has also announced a four-day variable rate repo auction for 1 trillion rupees which will take place on Monday. Payment towards Goods and Service Taxes will take place around February 20, with traders estimating outflow in the range of 1.6 trillion rupees to 2 trillion rupees. RBI steps Fund infused in billion rupees OMO purchase via auction 600.2 Screen-based bond purchases 388.15 FX Swap 440 56-day repo 500.1 49-day repo 750.03 Planned 4-day repo on Feb 17 1000 Planned OMO purchase on Feb 20 400 Total inflows 4078.48 ($1 = 86.7400 Indian rupees)
