yes...now they have started talking about sub 6% levels....
The benchmark 10-year government-security yield remained stuck in 8-7.5 percent range through all of 2015 and half of 2016, moving lower to sub-7 percent only when the RBI promised in April to reduce the system's liquidity deficit. The yield may now fall more.
After the Reserve Bank moved early 2015 to cut rates, it brought the benchmark repo rate down from a peak of 8 percent to 6.5 percent till before yesterday's policy. But the benchmark 10-year government-security yield remained stuck in 8-7.5 percent range through all of 2015 and half of 2016, moving lower to sub-7 percent only when the RBI promised in April to reduce the system's liquidity deficit. With the central bank slashing rates once more and the inflation outlook promising a few more cuts can follow in 2017, veteran observers of the bond market believe a 6 percent or sub-6 percent yield looks like a possibility next year. Such a move will have a bearing on almost all vital economic functions. Cost of borrowing will reduce as loans are linked to the risk-free g-sec rate, banks will see profits on their treasury books and economic growth may perk up further. In an interview with CNBC-TV18, Axis Bank Deputy MD V Srinivasan and Bank of America India MD and Treasurer Jayesh Mehta talked about the possible trajectory for bonds and the implications for the economy.
Last time when we talked sub-7 percent when the liquidity was infused, started about and as Srinivasan said earlier, there was expectation of one more cut till March. That continues, but I would say there is couple of changes which has happened. The monetary policy statement is sticking to monetary policy style of it, rather than other developments and the way it pans out it does talk about upside risk but there is also downside risk on inflation and if one takes that call looking at the world today maybe next year we can see more cuts. So, we might look into paradigm shift. Maybe initial stop for the 10-year at 6.50 percent or 6.55, people would rethink or people would book some profit but as things pan out in the next two months globally, that would determine the further course.
This in effect would mean that banks will cut lending rates if there is adequate liquidity in the system. As of now
there is surplus liquidity in the range of Rs 60,000 crore to Rs 70,000 crore in the banking system.
The benchmark 10-year government-security yield remained stuck in 8-7.5 percent range through all of 2015 and half of 2016, moving lower to sub-7 percent only when the RBI promised in April to reduce the system's liquidity deficit. The yield may now fall more.
After the Reserve Bank moved early 2015 to cut rates, it brought the benchmark repo rate down from a peak of 8 percent to 6.5 percent till before yesterday's policy. But the benchmark 10-year government-security yield remained stuck in 8-7.5 percent range through all of 2015 and half of 2016, moving lower to sub-7 percent only when the RBI promised in April to reduce the system's liquidity deficit. With the central bank slashing rates once more and the inflation outlook promising a few more cuts can follow in 2017, veteran observers of the bond market believe a 6 percent or sub-6 percent yield looks like a possibility next year. Such a move will have a bearing on almost all vital economic functions. Cost of borrowing will reduce as loans are linked to the risk-free g-sec rate, banks will see profits on their treasury books and economic growth may perk up further. In an interview with CNBC-TV18, Axis Bank Deputy MD V Srinivasan and Bank of America India MD and Treasurer Jayesh Mehta talked about the possible trajectory for bonds and the implications for the economy.
Last time when we talked sub-7 percent when the liquidity was infused, started about and as Srinivasan said earlier, there was expectation of one more cut till March. That continues, but I would say there is couple of changes which has happened. The monetary policy statement is sticking to monetary policy style of it, rather than other developments and the way it pans out it does talk about upside risk but there is also downside risk on inflation and if one takes that call looking at the world today maybe next year we can see more cuts. So, we might look into paradigm shift. Maybe initial stop for the 10-year at 6.50 percent or 6.55, people would rethink or people would book some profit but as things pan out in the next two months globally, that would determine the further course.
This in effect would mean that banks will cut lending rates if there is adequate liquidity in the system. As of now
there is surplus liquidity in the range of Rs 60,000 crore to Rs 70,000 crore in the banking system.
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