Technoglitch
Core Member
Indian traders fear that an interest rate rise from the US Federal Reserve this week could cause a destabilising spike in bond yields, and are calling on the Reserve Bank of India (RBI) to intervene by buying bonds via open market operations (OMO). Banks are the main buyers of government bonds but are already holding large amounts of them to meet reserve requirements, so their purchases are waning. At the same time, foreign investors are pulling out of many emerging markets at the moment, so there is less demand from them.
Foreign investors have pulled USD 1.7 billion out of India in November, the highest withdrawals since August. Indian government bond yields have been stubbornly high and remain close to where they were a year ago, despite the RBI having cut interest rates four times this year.
This means its loosening of monetary policy is not producing lower rates. "The RBI needs to conduct OMOs to provide markets with confidence that the mismatch in demand and supply in government bond markets will be addressed," said Vijay Sharma, senior executive vice-president at primary dealer PNB Gilts Ltd in New Delhi.
Once hot, bond mkts turn vulnerable ahead of Fed decision - Moneycontrol.com
Foreign investors have pulled USD 1.7 billion out of India in November, the highest withdrawals since August. Indian government bond yields have been stubbornly high and remain close to where they were a year ago, despite the RBI having cut interest rates four times this year.
This means its loosening of monetary policy is not producing lower rates. "The RBI needs to conduct OMOs to provide markets with confidence that the mismatch in demand and supply in government bond markets will be addressed," said Vijay Sharma, senior executive vice-president at primary dealer PNB Gilts Ltd in New Delhi.
Once hot, bond mkts turn vulnerable ahead of Fed decision - Moneycontrol.com