GSAP Has Room To Expand According To RBI Minutes

The RBI minutes yesterday made an interesting point regarding the GSAP and how it could be expanded, as well as emphasizing risks to the recovery from a resurgence in coronavirus cases and a need for accommodative policy.

• Goldman Sachs summarise: "On the INR1tn bond purchase program, the governor stated the objective as being the "orderly evolution of the yield curve and to avoid volatility in G-sec market", in order to ensure "congenial financial conditions for the recovery to gain traction". Dr Goyal additionally noted that the spread between 10-year government securities and short rates was too high, and that markets need firm and clear guidance as well as interventions to reduce market fears about higher rates which were "self fulfilling". She also suggested that given RBI had significant FX reserve buffers, that FX sales could "release space on RBI's balance sheet to buy more Indian government securities consistent with its target for creation of durable liquidity"."
• Data earlier in April showed India FX reserves rose to $581.21bn from previous $576.87bn. Reserves had touched a lifetime high of $590.18bn in the week ended January 29.
• Markets await INR 320bn of auctions and the RBI's reverse repo operation under the liquidity adjustment facility later in the session. The RBI will conduct INR 200bn of reverse repos with results announced after 0630BST/1100IST.
• Elsehwere, India's long-term foreign currency debt rating was affirmed by Fitch at BBB-, the lowest investment grade. The outlook remains negative.