See 10-year bond yield around 7.50% by March-end: Nomura

Vivek Rajpal, rates strategist at Nomura India, says: We will head into the new fiscal year with a total core system liquidity deficit of neutral level if we get one more OMO, which effectively means that liquidity worry will go away in the month of April.
  • Language
  • App
  • Subscriptions
  • Specials
  • Sign-In
  • Register
GeStepAhead GrowMyMoney IThe Winning Leap SME Special
Moneycontrol

Home » News » Economy

Mar 15, 2016, 03.17 PM | Source: CNBC-TV18

See 10-year bond yield around 7.50% by March-end: Nomura

Vivek Rajpal, rates strategist at Nomura India, says: "We will head into the new fiscal year with a total core system liquidity deficit of neutral level if we get one more OMO, which effectively means that liquidity worry will go away in the month of April."

Like this story, share it with millions of investors on M3

See 10-year bond yield around 7.50% by March-end: Nomura

Vivek Rajpal, rates strategist at Nomura India, says: "We will head into the new fiscal year with a total core system liquidity deficit of neutral level if we get one more OMO, which effectively means that liquidity worry will go away in the month of April."

Post Your Comments

Share Cancel

Vivek Rajpal (more)

Rates Strategist, Nomura India | Capital Expertise: Currencies

Vivek Rajpal, rates strategist at Nomura India, talks about the steps taken by the Reserve Bank to infuse liquidity into the system. He says: "We will head into the new fiscal year with a total core system liquidity deficit of neutral level if we get one more OMO, which effectively means that liquidity worry will go away in the month of April."
 
Below is the verbatim transcript of Vivek Rajpal's interview with Latha Venkatesh on CNBC-TV18.

Latha: This is it, it was a very good inflation number, one would have expected a little more, looks like the market is still pricing in only one rate cut of 25?

A: There are two important developments that happened yesterday. One, as you said, headline consumer price index (CPI) was lower than expected, which effectively cements the rate cut expectation for April 5. Number two, Reserve Bank of India (RBI) came out with open market operations (OMO) of Rs 15,000 crore. Last two times RBI has clearly surprised positively as far as liquidity management is concerned or as far as OMO buyback is concerned. This shows that they are becoming proactive in terms of liquidity infusion, which goes hand-in-hand with their current accommodative stance. My sense is a rate cut expectation on April 5 along with this proactive liquidity management will take the 10-year bond yield to 7.50 as we head towards March 31.

Latha: Is this all that proactive? The market is already so deeply negative in terms of liquidity and now advanced tax outflows start today, so the bond market — this is barely enough, isn't it? Shouldn't there be a couple of them for the markets to pass on yields? I guess that is why it is only 2 basis points.

A: There are two aspects. There is a core system liquidity deficit and there is a banking system liquidity deficit. OMO or bond buyback is a permanent liquidity infusion whereas the current liquidity deficit in the banking system is largely on a temporary factor and will be for 15 days up to March 31. So, if they get over aggressive for example then they may lose the control on the operating rate as we head into April. So they will have to be careful about it.

There is a lot that needs to be done as far as liquidity management framework is concerned but frankly relative to my expectations, a month back they have positively surprised. If my calculations are correct, we will head into the new fiscal year with a total core system liquidity deficit of neutral level if we get one more OMO, which effectively means that liquidity worry will go away in the month of April.

Buy, Hold, Sell ? Hear it first on M3
See 10-year bond yield around 7.50% by March-end: Nomura

See all

Get started using your favorite social network

or

Login using moneycontrol ID

Username
Password

Need help logging in? Reset password.

Don´t have an account? Sign Up

Get started using your favorite social network

or

Simply sign up using this short form

* mandatory

UserName*

Username should be atleast 4 character

Password*

Password should be 8 or more characters,
atleast 1 number, 1 symbol & 1 upper case letter

Alert

Your Password should contain
  • 8 or more characters
  • At least 1 number
  • At least 1 symbol
  • At least 1 upper case letter
Confirm Password*
Email
Already have an account? Login