How to invest in RBI bonds in India
The RBI's calibrated approach in exiting accommodative measures announced during the crisis period of 2008 and early 2009 was welcomed by traders as RBI announced 25 bps hike each in CRR, Repo Rate and Reverse Repo Rate, lower than the market expectations of 50bps.
The RBI seemed more concerned on Inflation front and accordingly shifted its actions to inflation-led, thus, giving a balanced approach to Growth-Inflation dynamics.
However, the Bonds markets could not cheer for the later part of the week and yields moved northwards across the curve in the following days.
However, the Bonds markets could not cheer for the later part of the week and yields moved northwards across the curve in the following days.
High Inflation pressure, large week-on-week gilts supply including overseas cues such as US Treasury Yields and Crude Oil Prices has continued to weigh on the gilt prices.
However, the better-than-expected 3G auction sentiments (The government hopes to collect Rs. 50,000 crore than its expectation of Rs. 35,000 crore), positive MET forecast of normal monsoons and lower than expected net borrowings (Rs. 25,000 crore net of redemptions) in the month of May can keep the sentiments positive.
During the week, the benchmark G-Sec Bonds 6.35% 2020 lost its significance and reported very thin volume as it got replaced by G-Sec 8.20% 2022 amid expectations that the RBI will announce a new benchmark next month.
You can Invest in RBI Bonds in India through Bonds India. The 10-year 6.35% 2020 and 8.20% 2022 yields moved down. While the benchmark yield settled at 8.06 per cent, 2 bps less than the previous week close, the new G-Sec 8.20% 2022 lost 16 bps since its inception.
Traders feared that 6.35% 2020 supply would either shrink or stop and volume shifted to G-Sec 8.20% 2022. Apart from this, the RBI successfully auctioned bonds worth Rs. 12,000 crore - the 7.02% 2016 for Rs. 6,000 crore, the 8.26% 2027 for Rs. 3,000 crore and the 2020 Floating Rate Bond for Rs. 3,000 crore. The RBI sold its first floating rate bond in this fiscal year 2010-11.
RBI Floating rate bonds are preferred by investors as the coupon is adjusted every six months, allowing to avoid booking nominal losses in their books. Know more about rbi floating rating bonds.
The RBI Bonds also announced that it would announce auction results of gilts on the following Monday of auction week instead of Friday of same week.
Liquidity as measured by bids for reverse repo/repo under Liquidity Adjustment Facility was comfortable with bids averaging Rs. 48,738 crore. The coming week may see a slight contraction in liquidity following Rs. 12,500 being drained out as a part of hike of CRR.
Liquidity as measured by bids for reverse repo/repo under Liquidity Adjustment Facility was comfortable with bids averaging Rs. 48,738 crore. The coming week may see a slight contraction in liquidity following Rs. 12,500 being drained out as a part of hike of CRR.
Corporate bonds in India also saw its credit spreads shrinking. Five- and Ten-year spreads dropped by 18 bps and 10 bps to 52 bps and 53 bps respectively. The 10-year Investment in Corporate Bonds yield closed at 8.75 per cent, a loss of 12 bps.
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