Debt-switch programme not to impact bond yields

-
The Rs 50,000-crore debt-switch programme, which is expected to begin anytime now, may not have any major impact on bond yields because most market participants will not come to know about it. The Reserve Bank of India (RBI) is expected to announce completion of the  programme during the third quarter monetary policy review on January 28.

Under the Rs 50,000-crore debt-switch plan stated in the Union Budget 2013-14, the government said it would buy short-dated debt and, in turn, sell longer-dated bonds. This is aimed at spreading out redemptions to later years.

The timing may be perfect to conduct a switch-over because of the falling bond yields. This will ensure that the programme sails through in a non-disruptive manner, also the aim of the central bank.

The programme will be conducted in a way that most participants will not be fully aware of it, like the way RBI brought the oil marketing companies back to the market for their dollar demand, without having much volatility on the foreign exchange market.

RBI had earlier said the programme would be rolled out in a non-disruptive manner. The Street believes the current market condition is conducive for the programme to happen.

Anoop Verma, vice-president (treasury), Development Credit Bank, said: "The debt-switch programme will be completed and then the market will be informed about it. Since it will be a closed-door kind of thing with one or two big institutions, RBI may just go to them and work out what is best for the government and those institutions. After the process is over, the market will be informed. Debt-switch can happen anytime. It can happen even tomorrow. Once it is done, RBI may just say they have done it.&"

RBI had last week deferred the government bond auction for a notified amount of Rs 15,000 crore, in view of the comfortable cash position of the government. Besides, on Wednesday, RBI is set to conduct an open market operation purchase of government bonds worth up to Rs 10,000 crore. These announcements added to positive sentiments.

"The debt-switch programme will be done bilaterally at market prices between interested counter parties and the Government of India. The market may be informed after the deal had been struck and concluded with those counter parties. The innocent market participants will not be harmed by the debt-switch programme,&" said Sandeep Bagla, executive vice-president at ICICI Securities Primary Dealership.

The yield on the 10-year benchmark government bond 8.83 per cent 2023 ended at 8.52 per cent on Monday, compared to the previous close of 8.63 per cent.

"Either on the policy day or the day when RBI completes the debt-switch programme, they (RBI) will just tell that they have completed it. The debt-switch programme will not affect the bond market,&" said a government bond dealer with a public sector bank.

Source » Business Standard
Thanking you

Regards,

Rajesh Kumar Kathpalia ¤ SMC Global
17,Netaji Subhash Marg,Daryaganj,
New Delhi-110002 Mobile No 9891645052
Email Id: rajesh.ipo@smcindiaonline.com


--
You received this message because you are subscribed to the Google Groups "Product Updates for AMC" group.
To unsubscribe from this group and stop receiving emails from it, send an email to Productupdatesforamc+unsubscribe@googlegroups.com.
For more options, visit https://groups.google.com/groups/opt_out.

Comments

Post a Comment

You are requested to mentioned your full name with email id while commenting.




I would like to request you to join our following services.
It is the smartest way to stay on top of latest Mutual fund, Bonds & IPO News .

 Product Updates on whatsapp


 Product Updates on Email 

                                                   
 Product Updates on Telegram



You will get daily news updates for FREE. 
I also request you to spread the world by referring us to the smartest people you know.  

To share it with your friends, 
just Copy below message it & paste in your group

Subscribe to Our WhatsApp, Email & Telegram Update Service ! https://bit.ly/3ryhxBM
     

Popular Posts

MFs raise expenses for liquid funds

-
MFs raise expenses for liquid funds The Rs 9 lakh crore mutual fund (MF) sector has finally decided to increase the expense ratio for liquid schemes - which have attracted the largest amount of short-term money, of Rs 2.5 lakh crore - to 20 basis point (bps). According to sector sources, the top 10-15 fund houses have come together and decided to charge 20 bps from February. "While there is no written understanding, we decided it's time, so that schemes do not incur losses," said the chief executive officer (CEO) of an MF who was part of these discussions. Many fund houses were charging as little as 2-5 bps in their liquid schemes. The decision comes at a time when liquid funds have been driving the sector's growth. As a recent CRISIL report noted, the assets of MFs rose to Rs 9.03 lakh crore in January, primarily because of the increase in liquid assets by 43 per cent or Rs 77,500 crore (total increase in assets was Rs 83,000 crore). Liquid or money market fu
Read more

Rupee falls to 5-month low, bond yields continue to rise

-
Rupee falls to 5-month low, bond yields continue to rise On Wednesday, the rupee ended at 61.5/dollar, a five-month low, compared with its previous close of 60.85/dollar, owing to increased demand for dollars after data showed the US was on a recovery path. There is concern the US might resort to raising interest rates sooner than expected, due to which emerging markets such as India will see outflows. The rupee opened at 61.04/dollar and, during intra-day trade, touched a low of 61.53/dollar. On March 5, it had closed at 61.76 a dollar. Since the beginning of this financial year, the currency has depreciated three per cent. "On Wednesday, the Reserve Bank of India (RBI) intervened through state-run banks, but in small volumes. There was not much dollar supply," said Sandeep Gonsalves, forex consultant and dealer, Mecklai & Mecklai. RBI's foreign exchange reserves are only $23 million short of its all-time high of $320.79 billion, recorded on September
Read more

Lessons from the Satyam scam

-
Lessons from the Satyam scam The signs of the Satyam scam should have come almost three weeks before when Ramalinga Raju proposed to buy a controlling stake in sister concern Maytas for around Rs 7,000 crore. When the institutional investors opposed vehemently, the company decided to go against it. Three weeks later on January 7, Raju confessed to 'cooking' Satyam's books. Within the next few days, the share price crashed to almost Rs 10 causing losses of over Rs 5,000 crore to around 300,000 investors. In the past five years, a number of companies have been suspended or fallen into bad times with Pyramid Saimira, Deccan Chronicle and Kingfisher Airlines being some of the more prominent examples. Usually, in such situations, individual investors get caught on the wrong side even if they have invested in such stocks through mutual funds. Sample this: When Satyam declared that they are withdrawing the proposal to buy the controlling stake in Maytas, many brokerage
Read more