INSUBCONTINENT EXCLUSIVE:
By Subhadip SircarBonds bulls in India have more reasons to cheer this week
Receding inflation pressure and a new central bank governor widely seen to have a dovish bent mean the swap markets have started pricing in
interest-rate cuts.
One-year onshore swap rates are factoring a 50 percent chance of a reduction around April or June, or 100 percent chance
of a 25-basis-point cut in August, according to ICICI Securities Primary Dealership Ltd
That’s a turnaround from a view in October for a hike of 100 basis points over the next 12 months.
“With the softening of CPI trajectory
in the near term, the market hopes that the Reserve Bank of India might take a softer stance in the near future,” said Kuldeepsinh Jagtap,
senior vice president at ICICI Securities Primary in Mumbai.
Even economists expect the RBI to reverse its stance and lower rates
thereafter.
The new governor’s “focus on growth and his view that inflation remains benign confirms our view that he is more neutral to
dovish,” Sonal Varma and Aurodeep Nandi, economists at Nomura Holdings Inc
wrote in a note.
Consumer prices rose 2.3 percent in November from a year ago, according to government data released after market hours
That’s the lowest in 17 months and compares with a 3.4 percent revised gain in October.
The sentiment in the local bonds has turned
dramatically after the recent slide in oil prices
Yields on the benchmark 10-year debt have fallen over 60 basis points since end-September
It was down 2 basis points at 7.39 percent on Thursday.
