The weighted average call rate (WACR) stood at 6.47% on Tuesday, as against 6.49% the previous day. The WACR is the operating target of the RBI’s monetary policy and is supposed to be closely aligned to the central bank’s repo rate. The repo rate is currently at 6.50%
Banking system liquidity has been in a surplus continuously for the past three months since June this year due to fresh government spending and inflows in local stocks and bonds.
In August this year, foreign portfolio investors bought $2.9 billion worth of fully accessible Indian sovereign bonds, according to data from CCIL. Last month also saw inflows in equities of $873 million, National Securities Depository Limited (NSDL) data showed.
However, the Reserve Bank governor has reiterated that excess liquidity is not indicative of a change in stance in the monetary policy framework. The stance of RBIs monetary policy committee is withdrawal of accommodation. Yields on the 10 year benchmark government security have been steady at 6.87%, but are gradually on a downward trend despite the RBI maintaining its stance of withdrawal of accommodation. Yield on the 10-year benchmark government bond was 6.91%, as on 2nd August, LSEG data showed. “Despite RBI maintaining their hawkish stance, yields have been going down. There is great demand from banks and insurance companies, and the demand is much more than supply. The price of commodities (crude oil) have also not flared up despite the global situation”, said Naveen Singh, Head of Trading at ICICI Securities Primary Dealers.Brent crude price fell by $1.66, or 2.1%, to $75.86 a barrel on Tuesday, according to StuffsEarth.
Singh expects the 10 year yield to soften to 6.7% by the end of this calendar year.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)
Reference :
Reference link
