Interest rate market
Not much of action expected in Interest rate market. There is severe strain in system liquidity with LAF draw-down above Rs.1 Trillion. It is mixed signals on expectation of 50 bps CRR cut and OMO bond purchases. There is dilution in rate cut expectation on strong pressure on rupee; weakness above 54.30 will definitely rule out rate cut action. Watch stability in 10Y Bond yield at 8.12-8.15%; test/break either-way not expected to sustain. The strategy is to buy at 8.15-8.17% and unwind “long” at 8.12-8.10%
OIS rates will stay in tight range at 7.57-7.62% (1Y) and 6.97-7.02% (5Y); test/break either-way difficult to sustain. The strategy is to receive at 7.62-7.65% and 7.02-7.05% and unwind “received” book at 7.57-7.55% and 6.97-6.95%
FX premium is steady at 6.25% (3M); 5.4% (12M) and October/September at 267. It is not prudent for strategic players to chase the sharp fall from recent high of 7.15%, 6.10% and 285 and hence would suggest to book profit at current and possibly into 6.10% and 5.25%. It is good ALM play to initiate paid book at 6.25-6.10% (3M) and 5.35-5.25% (12M) for interest cost advantage by shifting rupee liabilities into dollars. The strategy for traders is to pay 12M at 5.35-5.25% and receive 5.50-5.65% with tight stop.
Good luck...........................Moses Harding
Interest rate is one of the factor which is used to control inflation condition prevailing in the country.This post helped me in learning good updates on interest rate.
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