The 10-year bond yield at 7.85 percent factors in the positives, says Manish Wadhawan, MD & HD-Interest Rates, HSBC.
Manish Wadhawan, MD & HD - Interest Rates, HSBC feels the RBI is trying to inject some kind of permanent liquidity into system because OMO is a manifestation of that. RBI has announced OMO for bond buyback.
Real impact on the rupee would be judged only when oil is brought back to market fully, says Manish Wadhawan of HSBC. Equity flows have been good in the recent past but one of the worrying parts has been that on the debt side we have seen continuous outflows.
Manish Wadhawan, MD & HD -Interest Rates, HSBC sees the 10-year yields would hover between 8.50-8.75 percent for time to come till normalisation of rates happens.
Markets were surprised with the 25 basis points repo rate hike and now there is a fear that rates may be hiked further. But even with the repo rate hike, the yields range for the 10-year bonds could be 8.50-9 percent for the next 2-3 months, says Manish Wadhawan of HSBC.
Bond yields rose, with the 10-year bond yield closing at the day's high of 8.58 percent, up 39 bps on the day. The negative spread between the 1-year and 5-year OIS shrunk to 46 bps from 70 bps on Thursday.
"For the past few days, the market has been reacting with a fear after listening to RBI governor I would say it is positioning itself with a view of no rate cut now," Manish Wadhawan of HSBC told CNBC-TV18.
Bonds are likely to stabilise and consolidate for a few days before they could rally ahead of RBI's credit policy next week, says Manish Wadhawan, HSBC.
Manish Wadhawan of HSBC Bank believes the IIP number is more on expected lines, but a rate cut from RBI on October 30 cannot be predicted. He further stated, if the inflation figure released on Monday is around 7.75%, there may be a 50-50 chance of a rate cut.
Lauding the government‘s announcement to reduce withholding tax by 5 percent on overseas borrowing by local companies, Manish Wadhawan, MD & HD -Interest Rates, HSBC said that this move will have a positive impact on the overall borrowing capabilities of the corporate India.
As the debates continues as to whether or not the RBI must loosen interest rates, CNBC-TV18 spoke to two experts - Manish Wadhawan, HSBC and Samiran Chakrabarty of StanChart, if they were expecting a non-event policy or if they felt the RBI may choose to surprise.
Expect the bond markets to be firm on overnight global cues, says Manish Wadhawan, HSBC.