How to buy RBI bonds in India

 RBI Bonds in India announced policy rate hikes; Repo, Reverse Repo and CRR hiked to 5.25 per cent, 3.75 per cent and 6 per cent respectively, up by 25 bps.

• Invest in RBI Bonds RBI followed "baby steps" instead of "big leap" as a part of unwinding accommodative measures

• RBI's M3 growth, Deposit Growth and Credit off-take projected at 17 per cent, 18 per cent and 20 per cent respectively for Fiscal Year 2010-11

• CRR hike of 25 bps drained out Rs. 12,500 crore from the system; liquidity still abundant with weekly average of above Rs. 48,000 crore

• Bond Markets in India reacted positively to RBI announcements; Yields moved down. Benchmark G-Sec 6.35% 2020 settled at 8.06 per cent or Rs. 88.64; Introduction of new security G-Sec 8.20% 2022

• Buy Bonds Online in India remained buoyant throughout the week following the RBI's announcement of policy rate hikes.

• Inflationary pressures (food including non-food) and overseas cues such as US Treasury Yields and Crude Oil Prices may also influence domestic bond yields.


View & Recommendation:
The RBI Bonds policy rate hike is unlikely to put any large impact on short-term yields due to abundance liquidity in the system. The high steepness at the shorter end (1-5 years) of the yield curve may prompt fund managers to roll-down the yields to generate extra returns provided the yield curve does not move significantly. Know also why to invest in rbi bonds. 

Liquid Funds and Ultra-Short Term Bond Funds will continue to be preferred for investors having investment horizon of 1-3 months and 3-9 months respectively. Investors should avoid investing in high average maturity funds and should restrict investments to funds having average maturity up to 1 year. Short Term Income Fund will fill the void in this category.


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