Going long on short bonds gets boost in India from RBI Cash Move

(Bloomberg)-Investors are set to Funnel Surplus Money INTO SHORT-TERM Bonds, Further Boosting An Alredy Favored Play in India’s Debt Market, after the Central Bank’s Surprise Decision to Inject to Injac The banking system.

The reserve bank of India’s unexpected movie to release 2.5 trillion rupees ($ 29 billing) Including Uti Asset Management Co. And Pgim India Asset Management.

“If credit growth is not shaping up, the questions how to deploy the huge surplus liquidity,” said nitin agarwal, head of India trading at Australia & NEW ZEALAND BANKING GROP LTD. “In such a scenario, funds will be deployed in short-end bonds.”

India’s Yield curve has been steepning this year on the back of the RBI’s sizable liquidity infusions, as short-term yields have dropped at a faster pace from The trend has accelerated since friday flying

Some investors are also looking to buy short-teenor company debt, Citing attractive yields on such notes currently.

“We will reorient our portfolio towed corporate bonds, especially in the 3-7 years segment where we believe that spores are attractive given the backdrop of abundant likdity,” Pal, Head of Fixed Income at Pgim Asset Management.

HSBC Asset Management also favorite corporate bonds in the 3-5 year range, which are offering spores of 50-70 Basis Points Over Comparable Government Bonds, It Said in A Note. ITI Asset Management Likes Higher-Rated Bonds of State-Run Companies and Shadow lenders.

Still, not all are convined that the trade has more room to run. Bandhan Asset Management, For Instruction, Believes Further Gains in the Shorter-Dated Paper Cold be Dificult.

“The curve should see stabilize, and we could see boths of both steepning and flattening as Market Participants Reposition,” said sandeep Yadav, Head of Fixed Income at DSP Asset MANGERS PVT.

For now, steepning remains a dominant theme. The spread between the 10-yar and 5-yar benchmark yields has widened to about 50 Basis points-a three-yar high.

As the 10-Year Yields Rose, A State-Run Lender Power Finance Corporation Ltd. Withdrew its plan to raise funds through bonds due in July 2035, While it now plans to Issue Shorter Bonds Maturing in Nearly Two Years and About Five Years, According to PEOLARIARIGING to PELARIAr The matter.

“While long-end bonds are not necessarily overvalued, Shorter-Ed Bonds will have a clearer runway for their yields to fall,” said nitin agarwal at anz banking grop.

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