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Bond market reacts positively to RBI's neutral stance

By Staff
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Mumbai, Apr 18 (UNI) The RBI credit policy announced today brought back buying in the bond market as the Central Bank left the interest rates untouched.

The bond market reacted positively to the neutral stance and 10-year benchmark bond yield dipped by about 8-10 basis points after the RBI credit policy announcement, said Mohan Shenoi, Group Head Treasury, Kotak Mahindra Bank.

''Traders were seen buying bonds immediately after the announcments, leading to a 10 paise rise in 10 year paper,'' a trader in the money market said.

''Earlier, traders had lightened their positions, expecting a 25 to 50 basis points rate hike,'' the trader added.

The 8.07 per cent 2017 paper closed at Rs 104.15, up by more than a rupee while the yield was down to 7.50 per cent.

The 7.59 per cent 10 year government paper Rs 100.20 while the yield was at 7.41 per cent.

However, Mr Shenoi said, ''I feel that a neutral stance in January this year when liquidity situation was very tight and a hike now when there is a surfeit of liquidity would have given the right signals to the market.'' RBI, in its annual policy statement announced today, left the bank rate, cash reserve rate (CRR), repo and reverse repo rates unchanged at 6 per cent, 5 per cent, 6.5 per cent and 5.5 per cent, respectively.

The Central Bank also asserted its readiness to act in a timely and prompt manner on any sign of evolving circumstances, impinging on inflationary expectation.

UNI RRP KD AW1835

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