Let's Twist Again

Indian bonds are bid across the curve as markets await the RBI's operation twist, the central bank have increased the size of long end purchases to INR 200bn, while keeping short end issuance at INR 150bn.

• Operation details:
  • Plans to buy 5.15% 2025, 7.17% 2028, 5.85% 2030 and 7.57% 2033, total INR 200bn
  • Sell 8.79% 2021, 8.20% 2022 and 8.35% 2022, total INR 150bn
• Swaps are pricing in an increased chance of an interest rate hike, 5-year swaps rose almost 65bps in February as economic optimism rose and markets digested an expansive and supportive budget. Swaps now price in 50bps of hikes in 2021.
• The fixed income space could face headwinds after reports that India's entry into global bond indexes has been postponed because of demands, including on preferential tax treatment. Other demands also include listing Indian sovereign debt on an international securities depository system.
• As a note, Indian markets are closed tomorrow for local holiday Mahashivratri.