03 January 2013
Interest rate market
Bond market is bullish since strong interest rate guidance from RBI in mid quarter review of monetary policy in mid December. Since then, 10Y Bond has rallied from 8.18% to 7.98%. In the process, met the first objective set for 2013 at 7.97-8.0% and looks good for extension into 7.65% by March-June 2013. For today, let us continue to stay with set trading range of 7.90/7.93-8.0/8.03 with bias into lower end. The strategy is to stay “long” at 8.0-8.03% for 7.90-7.93%. The break-out trigger will be from December headline inflation print which is not expected to throw unpleasant surprises; timing of rate cut is not very relevant as long as the rate reversal cycle begins in January-March 2013.
OIS rates steady and is heavy at/above 7.60% in 1Y and 7.13% in 5Y. The near term outlook is soft riding the interest rate play for immediate objective at 7.48-7.53 and 6.98-7.03 respectively. While it is prudent to chase the 1Y rate below 7.48, risk-reward will be poor to stay received in 5Y OIS at 6.98-7.03% where discount in 1X5 is expected to squeeze (into par before end of 2013). For today, let us continue to stay with set trading range of 7.48/7.53-7.60/7.63 in 1Y and 6.98/7.03-7.13/7.18 with bias into lower end. The strategy is to stay “received” for set objectives.
FX premium is steady at set ranges of 6.60-6.85% (3M) and 5.60-5.85% (12M). The near term outlook is soft riding the interest rate play while cues in exchange rate play is mixed tracking back-and-forth trades in USD/INR at 54.10-55.10. The short term bias is however for move into 6.15% and 5.4% respectively while bullish momentum into 7% and 6% will attract. For today, let us continue to stay with set trading range of 6.60-6.85% (3M) and 5.60-5.85% (12M), break either-way to attract. The strategy is to trade end-to-end and stay received for eventual extension into 6.15% and 5.4%.
Have a great day ahead and Good luck..................................Moses Harding
No comments:
Post a Comment