Nomura bullish on India bonds, offshore OIS belly

Nomura says fall in November inflation gives credence to view that Indian market rates are falling.

Bank expects a 25 basis points cut in the repo rate at the central bank's January policy review, while putting chances of a rate cut on Tuesday at 35 percent.

Investment bank continues to see value in expressing bullish rates view via government bonds and belly of offshore OIS curve, as front end is already pricing in fair amount of cuts.

Nomura remains comfortable with long India bond trades with targets at 7.80 pct for 8.15 pct 2022, 7.90 pct on 8.33 pct 2026 and 7.70 pct on 8.07 pct 2017 bond.

Sees value in holding 1-yr pay, 3-year receiver flatteners as front-end offshore OIS is already pricing in rare cuts and does not expect the RBI to move before January.

Adds a receive 3-year offshore OIS position to portfolio.

Also read: Bankers rule out repo rate cut, bet on lower CRR