Fixed Income And Currency Market

24 Jan 2021

RBI creating a moral hazard will lead to a blowout as risk gets mispriced

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In the last government bond auction conducted on the 22nd of January 2021, the bond market clearly showed its reluctance to bid for bonds at current levels of yields. The 5-year benchmark bond saw the RBI devolving the full auction on to the underwriters, as bids were well above 5.3% levels, almost 40bps higher from lows seen a few months ago. RBI also did not accept any bids for the 10-year benchmark bond, as the market bid at higher levels.

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Arjun Parthasarathy
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