Fixed Income House View Presentation

07-09-2021 05:46 PM | Source: Tata Mutual Fund

Fixed Income House View Presentation - Tata Mutual Fund

News By Tags | #392 #301

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FIXED INCOME HOUSE VIEW

RBI OBJECTIVES AND ACTIONS

* Foster economic growth over the coming financial year while keeping a close watch on inflation. RBI would like to be sure of growth impulses getting firmly entrenched before it starts withdrawing its accommodative monetary policy stance.

* RBI stated its intention to ensure orderly evolution of the G-Sec curve & reduce volatility to ensure a stable rate structure. • RBI is expected to support the government borrowing program.

* Intervene through various measures (OMO/G-SAP, Operation Twist) to control upward movement in yields.

* RBI is expected to intervene decisively, especially in the short end of the curve to support bond prices as the government and corporates are expected to borrow in this segment.

* If CPI inflation continues to remain high, measures from RBI to take out surplus liquidity from the system could be activated in the August 2021 monetary policy.

RBI Interventions

* RBI bought almost Rs 27000 crores worth of 10-year G-Sec and canceled an auction during the month. With this buying, RBI now holds more than 65% of the outstanding benchmark paper.

* In the MPC, governor announced GSAP-2 worth Rs 1.2 trillion for the Jul-Sep quarter which was expected. Adding Rs. 10,000 crores of state loans in GSAP-1 gave expectations that RBI might add another Rs.10-20,000 crores of SDL buy back in GSAP-2 as well.

Forex Position

* RBI’s holds a comfortable forex Reserve of $603 billion and forward purchases worth $60 Billion.

* This means RBI can follow its own independent monetary policy at least in the short term and support growth instead of worrying about forex outflows.

RBI ACTIONS AND SYSTEM LIQUIDITY