Bond Markets Left Disappointed

Repo Rate: 4.00% (est. 4.00%, prev. 4.00%)

Reverse Repo Rate: 3.35% (est. 3.35%, prev. 3.35%)

Cash Reserve Ratio: 3.50% (est. 3.00%, prev. 3.00%); RBI Gov Das said the rate would be normalised to 4.00% in two phases (hike to 4.00% on May 22)

• RBI unanimously voted to leave the benchmark interest rate unchanged at 4.00% but maintained an accommodative stance, RBI Governor Das noted the bank would support the economy and implied rate cuts in the future were possible if need arises to support the economy.
• The RBI also upgraded its growth outlook. The new forecasts expect growth of 10.5% from an estimated 7.7% contraction in the current fiscal year and offered a positive outlook.
• The bank also announced a proposal to allow retail investors online access to government bonds directly through the RBI. This could help support bonds amid the massive issuance programme to support the expansionary budget in the coming fiscal year.
• Bond markets have been pressured since the announcement of the budget at the start of February. Das emphasised the stance of liquidity management continues to be accommodative and that the RBI will ensure ample liquidity in system.
• Despite these measures, bond markets have sold off after the announcement as Das fails to outline any specific measures to support the bond market (i.e. outright purchases).
• INR bid on the back of the release though, USD/INR last down 0.412 at 72.9175 making new session lows.