{"id":73781,"date":"2018-04-21T01:36:54","date_gmt":"2018-04-21T01:36:54","guid":{"rendered":"http:\/\/www.bnreport.com\/how-rbi-minutes-aided-rupees-crash-bonds-and-the-rupee\/"},"modified":"2018-04-21T01:36:54","modified_gmt":"2018-04-21T01:36:54","slug":"how-rbi-minutes-aided-rupees-crash-bonds-and-the-rupee","status":"publish","type":"post","link":"https:\/\/www.bnreport.com\/en\/how-rbi-minutes-aided-rupees-crash-bonds-and-the-rupee\/","title":{"rendered":"How RBI Minutes aided rupee’s crash bonds and the rupee"},"content":{"rendered":"

Bonds and currency crashed as the minutes of Monetary Policy Committee<\/a> meeting quoted a deputy governor that signalled there might be a tightening of rates in June if commodity prices rally upsetting inflation calculations. <\/p>\n

The rupee breached the crucial 66 level, extending losses against the dollar amid a bout of overseas fund outflows. This week, the local unit lost 1.36% to close at 66.11 a dollar Friday, its weakest in 13 months. <\/p>\n

I am, however, likely to shift decisively to vote for a beginning of \u201cwithdrawal of accommodation\u201d in the next MPC meeting in June,\u201d said Viral Acharya<\/a>, deputy governor said in the minutes released on Thursday. <\/p>\n

\u201cThe MPC minutes have sent jitters among debt investors," said Manish Wadhawan, MD & Head of Fixed Income at HSBC India. \u201cThe hawkish tone is clearly contrary to what the April RBI<\/a> policy statement indicated, with many expecting an extended pause. This has triggered the sell-off in the debt securities with foreign investors cutting their sovereign holdings." <\/p>\n

"The rupee too is under pressure amid bout of overseas fund outflows and rising oil prices," he said. <\/p>\n

Overseas investors sold Rs 7,729 crore worth of debt papers and equities in April. In the past few days, they have been selling bonds in particular. <\/p>\n

\u201cThere is additional dollar demand coming from importers,\u201d said KN Dey, founder, United Financial Consultant, a forex advisory firm. \u201cThe abrupt closer of Letter of Undertaking (buyers credit) prompted importers to buy dollars directly from the currency market, adding a few billions to dollar demand.\u201d <\/p>\n

RBI has banned such importer credit instrument after the countrys biggest banking fraud hit the Punjab National Bank. <\/p>\n

Bond yields surged 17 basis points, pulling prices down, as the rate increase fear made investors jittery. The benchmark yield rose seven basis points to close at 7.70%. Bond yields and prices move in opposite direction. <\/p>\n

During the day it shot up as high as 7.80%, the highest intraday level in about two months. The gauge lost 21 basis points during the week. RBI's weekly bond auction<\/a> marginally devolved for about Rs 400 crore out of Rs 12,000 crore. Bond houses bought those unsold sovereign papers. <\/p>\n

\u201cMarkets have reacted sharply to one members view,\u201d said Krishnamoorthy Harihar, treasurer, FirstRand Bank. \u201cAlso, the global backdrop has not been conducive as US Fed is on rate increase mode while oil is on boil. Geopolitical tensions have escalated hinting a risk-off sentiment.\u201d <\/p>\n

\u201cAll these factors have set the yields higher while rupee is losing value to the dollar,\u201d Harihar added. <\/p>\n

\u201cMarket participants are not able to correlate the RBI minutes on how they reduced inflation projection so dramatically,\u201d said Ashish Vaidya, head of trading at DBS Bank India \u201cWeakness is likely to remain with both rate and currency markets.\u201d <\/p>\n

Derivative instruments<\/a> in the fixed income were quick enough to indicate a tightening rate cycle over the next four quarters. The Overnight Indexed Swaps<\/a> (OIS) with one-year maturity, where a trader exchanges fixed rate payment for floating rates, climbed five basis points to 6.57 per cent Friday. <\/p>\n

\u201cThis is a case of impropriety. The central bank should also come up with a dot chart in line US Fed where they give future projections on a policy day itself,\u201d said a treasury head from a state-owned bank: <\/p>\n

<\/a><\/strong> <\/a><\/p>\n

Original Article<\/a><\/p>\n

[contf]
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ET Markets<\/a><\/h5>\n

[contfnewc]
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Bonds and currency crashed as the minutes of Monetary Policy..<\/p>\n","protected":false},"author":1,"featured_media":73782,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[202],"tags":[],"class_list":["post-73781","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-finance"],"yoast_head":"\nHow RBI Minutes aided rupee's crash bonds and the rupee - Business News Report<\/title>\n<meta name=\"description\" content=\"Bonds and currency crashed as the minutes of Monetary Policy..\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.bnreport.com\/en\/how-rbi-minutes-aided-rupees-crash-bonds-and-the-rupee\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"How RBI Minutes aided rupee's crash bonds and the rupee - 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