Rally in debt, currency markets to continue this week: Ind-Ra
02/08/2016 12:31
The rating firm said that the near-term incremental rally in the bond market will be gradual, with a major chunk of the rally already underway, while the soft dollar globally will continue aiding rupee strength in the near term.
The 10-year G-sec yield is likely to stay at 7.10 per cent-7.20 per cent this week (7.16 per cent at close on 29 July 2016). The rupee is likely to trade at 66.5/USD-67.25/USD (66.99/USD at close on 29 July 2016), Ind-Ra said in a report.
Ind-Ra believes after the sharp rally in the domestic bond market, the G-sec will enter a consolidation phase in the near term. Domestic bonds have rallied substantially to below 7.15 per cent currently from 7.45 per cent at the start of July 2016, a trend mirrored by government bond yields globally.
Systemic liquidity has remained neutral for the most part of July 2016 and there has been no core liquidity infusion. The agency continues to expect liquidity to remain balanced overall in the upcoming week. The scope for open market operation purchases of G-sec in August is likely to be minimal.
On the rupee front, the agency expects the Indian currency market to remain buoyant in the near term, as high-yielding Indian assets retain their attractiveness, following the Fed’s move to leave interest rates unchanged. The agency believes accommodative global central banks and the ensuing surge in risk preferences will augur well for the rupee in the near term.
The agency believes that, in the near term, the rupee is likely to trade with an overall stable bias as investors focus on the Parliament’s ongoing monsoon session to discern signs of meaningful progress on key reforms.
