Tuesday, April 21, 2009

Canara Robeco MF : RBI Policy - Key Highlights

Our Expectations From Policy:

• With RBI giving a symbolic support in form of rate cut, participants are expecting further strong actions and support from RBI going ahead in helping revive the economy.

• Sovereign Debt: With plush liquidity, slowing credit growth and RBI stance to help revive economy,the benchmark yield has softened by 20 bps and is expected to soften further. We expect 10-year benchmark GOI to test 5.50% going ahead.

• Corporate Debt: The corporate bond market is subject to the supply of such bonds. Though themovement in long bonds depends upon underlying G-sec movements, liquidity is an importantfactor in short term. We expect 5 yr corporate bond to breach 7% and 10 yr corporate bond to test 8% going ahead.

One year CD rates could go sub 5% and 2-3 yr bonds are expected to be in range of 6.25% -6.75% going ahead.

Liquidity will be buoyant in the system and overnight rates will therefore continue to remain in range of 2.50% – 3. 50%.

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