No change in view of consolidation play in 10Y Bond yield at 8.12-8.15%; 1Y OIS at 7.57-7.62% and 5Y OIS at 6.97-7.02%. The strategy is (a) to stay “long” at 8.15-8.17%; 7.62-7.65% and 7.02-7.05%; (b) traders to exit earlier “longs” at 8.12-8.10%, 7.57-7.55% and 6.97-6.95% and (c) strategic investors can hold to “long” bonds entered at 8.17-8.20% and 5Y OIS received at 7.02-7.05%. The recovery in rupee from above 54.80 into 52-53 consolidation by 30th October can lead to RBI’s rate action; 25 bps rate cut along with 25-50 bps CRR cut which would trigger extension of recent rally into 8.05%; 7.50% and 6.90% which should hold.
FX premium held well above set pay zone of 6.25-6.10% (3M) and 5.35-5.25% (12M) and into higher end of 6.25-6.50% and 5.35-5.60%. Watch consolidation play end-to-end and test/break either-way to trigger actions.
Good luck........................Moses Harding
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