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Last Updated : Nov 29, 2016 02:42 PM IST | Source: CNBC-TV18

Bond yields to trade in 6.2-6.4%; constructive on Re: Strategist

Nomura India has a constructive view on the Indian rupee and expects it to outperform other emerging markets in the medium-term perspective, says Rates Strategist Vivek Rajpal. The rupee opened at 68.75 to a dollar in trade today.


Nomura India has a constructive view on the Indian rupee and expects it to outperform other emerging markets in the medium-term perspective, says Rates Strategist Vivek Rajpal. The rupee opened at 68.75 to a dollar in trade today. 

Rajpal cautions there could be volatility in the currency in near-term and refrains from giving a range for the rupee.

He expects 10-year government bond yields to be in the range of 6.2-6.4 percent ahead of the upcoming US Federal Reserve meet on December 7, where a rate cut is widely anticipated. Thereafter, it will depend on the rate action by Fed, he says.

Bond yields were at 6.34 percent in opening trade today and Rajpal does not rule out a drop to 6.20-6.25 percent as an immediate reaction to the Fed outcome.

Below is the transcript of Vivek Rajpal’s interview to Latha Venkatesh and Sonia Shenoy on CNBC-TV18.

Latha: Where do you see the 10-year stabilising for now, if you can get stability at all? And what happens post December 7?

A: As far as 10-year bond yield is concerned, the broad range in which we will trade for the time being is 6.20-6.40. That is the range that market will trade in. It is likely that we move below the repo rate heading into December 7 meeting because there are expectations that there will be rate cuts. Market will trade with an easing bias heading into December 7 meeting and then, from then we have to take forward how Monetary Policy Committee (MPC) reacts.

Latha: 6.3 for now, that is the opening trade. You think that whatever it had to lose because of cash reserve ratio (CRR) hike is over and now you will see the yields starting to fall? Up to December 7, you said below the repo rate. So, it goes to 6.2, 6.1, 6?

A: As I said, the range is 6.4 to 6.2. I do not rule out another five basis points, but as we head towards the December 7 meeting, probably we will go back towards 6.2-6.25 range.

Sonia: Let us also talk about the rupee. What is your prognosis over the rupee over the next one month or so?

A: As far as rupee is concerned, generally, we have a constructive outlook on the rupee from a medium-term perspective. Near-term, there will remain a volatility. Nevertheless, I do not think anything changes as far as the medium-term outperformance is concerned.

Latha: It will be an outperformer vis-à-vis emerging markets, you mean?

A: Yes.

Latha: So, what are you prepared for in terms of a range? Does it get to 70 per dollar at all or would it linger between 68 and 69.50 per dollar?

A: I do not have a strong view on the range of rupee.

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First Published on Nov 29, 2016 09:57 am
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