Indian bonds may slip after RBI shortens swap window for diaspora deposits
Yield on the benchmark 6.94% 2036 bond may hover in the 6.75% to 6.78% range, private-bank trader says
The Reserve Bank of India (RBI) has shortened the swap window for diaspora deposits, causing a potential drop in Indian government bonds on Monday. This move dented investor sentiment, while rising oil prices added to the pressure. The RBI's yield on the benchmark 6.94 percent 2036 bond could range between 6.75 percent and 6.78 percent, according to a private-bank trader.
The RBI announced the closure of the discounted forex swap facility for banks to hedge against diaspora foreign-currency deposits a month earlier than planned, on August 31 instead of September 30. Markets are reacting to this early closure of the FCNR(B) scheme, with Brent crude also higher, trading at $89.20 a barrel. Indian bonds have traded in a tight range throughout August, supported by strong FCNR(B) inflows and the RBI's dovish policy tone.
However, traders are awaiting minutes of the RBI's August monetary policy decision for further cues. Overnight index swap rates are expected to decline as the early closure of the FCNR(B) swap facility impacts sentiment.
Written by urgent.news from Hindu BusinessLine's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
