Loan rates may remain same for next 6 months
The inflation forecast for the next fiscal year has been pegged at 5.1-5.6% in the first half and 4.5-4.6% in the second half, with risks tilted to the upside.
In the past three trading sessions, the one-year maturity gauge has dipped about 15-18 basis points, signalling that traders do not expect any imminent rate rise. They are now staring at an extended period of policy pause. The overnight indexed swaps (OIS) with one-year maturity, is a platform where a trader exchanges fixed rate payment for floating rates. It is a derivative instrument.
“The RBI policy was less hawkish than expected tweaking the market sentiment,” said Neeraj Gambhir, MD and Head of Fixed Income at Nomura India.
“The sudden fall in one-year OIS reflects only easing sentiment on rate expectation. At least next two quarters, there should not be any policy rate increase.” “If inflation data are in line with RBI’s projection, we may see an extended pause,” he said. RBI raised its inflation projection to 5.1% in the fourth quarter, including the impact of HRA payments, from 4.2-4.6% in the third quarter amid a surge in retail food prices.
The inflation forecast for the next fiscal year has been pegged at 5.1-5.6% in the first half and 4.5-4.6% in the second half, with risks tilted to the upside. “It is apparent that RBI is in no hurry to start increasing the policy rate,” said Vijay Sharma, executive vice president for fixed-income at PNB Gilts.
“This reading prompted people to take position in short-term dated gsecs including overnight interest rate swaps.” “This is an offshoot of RBI policy statement, which is now driving bond market on shorter durations, than any external factor,” he said.