Investment Insights

Arvind Subramanian & Khushboo Sharma

Liquidity in Credit Markets – Update

By: Arvind Subramanian & Khushboo Sharma

Slowing flows into Credit oriented funds   It is well known that lower rated credits have low/negligible liquidity in the bond market. This has been further exacerbated in recent months wherein debt markets have seen deteriorating liquidity for even AAA rated corporates. Nevertheless, illiquidity concerns in the lower rated credit space have seldom been at […]

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Suyash Choudhary

Value Investing – The AAA way

By: Suyash Choudhary

AAA Corporate Bond sell-off   Corporate bond yields have witnessed a substantial rise in the past few months, as can be seen in the chart below. The reasons for this have been articulated through various notes in the past.     What happened in the non-AAA corporate bond space?   Having witnessed such a rise […]

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Suyash Choudhary

Awaiting MSP For Bonds

By: Suyash Choudhary

The much-awaited announcement on summer crop Minimum Support Prices (MSP) came through this week. The prices are in line with the budget announcement of 1.5 times cost. Most commentary post the release is understandably hazy since, while the numbers on paper look alarming in terms of impact on CPI, it is yet unclear how effective […]

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Suyash Choudhary

RBI Hikes But Doesn’t Guide

By: Suyash Choudhary

The RBI hiked rates by 25 bps, thereby taking repo to 6.25%. The market was largely indifferent with respect to the timing of the hike, insofar that the market was already fully pricing in more than a 50 bps hike. Some of the key takeaways were as follows:   1. The MPC has hiked its […]

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Suyash Choudhary

Introduction The last month has been challenging for emerging markets. While some of these have had individual idiosyncratic issues, a renewed strength in the US dollar seems to be behind the general recent aversion to emerging markets. That strength itself is being attributed to various things: Growth prospects in the US versus other major economies […]

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Suyash Choudhary

RBI Fires OMO

By: Suyash Choudhary

The RBI surprised markets by announcing an INR 10,000 crores Open Market Operations (OMO) bond purchase to be held on the 17th of May. While most market participants would have anticipated bond purchases by the RBI in the current year, given shrinking core liquidity in context of sharply rising currency in circulation and a dwindling […]

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Suyash Choudhary

A couple of months back we had highlighted in a note how the sharp rise in AAA bond yields over the past year or so hasn’t been accompanied with a similar rise in yields on lower rated assets. Owing to this, there has been a significant yield compression between AAA oriented short term funds and […]

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Suyash Choudhary

It may be recalled that the April RBI policy had pleasantly surprised the market, insofar that FY19 CPI forecast was brought down. While the reduction in H1 FY19 forecast was understandable given the lower than expected average for Q4 FY18, what was surprising is that even H2 FY19 forecast was reduced to 4.4% from 4.5 […]

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Suyash Choudhary

Introduction   India’s once unassailable macro has taken some hits recently. We have argued before that this should be seen in the whole context; that our inflation and current account had compressed to almost unsustainable levels given the context of a growth economy. Nevertheless, the recent deterioration in our macro comes against rising risks in […]

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Suyash Choudhary

The bond market took the RBI policy gladly and used it to build on the momentum already established since the announcement of the H1 borrowing program. Specifically, the bond market took positively the downward revision to RBI’s CPI forecast for the year ahead, as well as its specific focus on the CPI ex-HRA in the […]

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