Bond yields hardened after India’s central bank, delivering on much expected lines, in its first bi-monthly monetary policy statement, 2015-16 kept the policy repo rate under the liquidity adjustment facility (LAF) unchanged at 7.5% and consequently, the reverse repo rate under the LAF unchanged at 6.5% and the marginal standing facility (MSF) rate and the Bank Rate at 8.5%. Also, the cash reserve ratio (CRR) of scheduled banks was untouched at 4.0% of net demand and time liability (NDTL).
Meanwhile in its policy stance and rationale, Rajan affirmed his commitment to the accommodative stance, but added that policy moves will be shaped by incoming data and added that transmission of rate cuts by banks will be his top-most priority.
On the global front, US treasury debt prices dropped on Monday in thin trading, giving up gains from the previous session after an unexpectedly weak nonfarm payrolls report that might have pushed out the timing of an interest rate increase from the Federal Reserve. Meanwhile, brent crude fell more than 1% on Tuesday, paring overnight gains of nearly 6% after Goldman Sachs said prices needed to remain low for months to achieve a slowdown in US output growth.
Back home, the yields on 10 year Government Stock was trading 3 basis points higher at 7.75% from its previous close of 7.72% on Monday.
The Reserve Bank of India will conduct 3 day variable rate reverse repo auction for a notified amount of Rs 50,000 crore on April 7, 2015, Tuesday. The auction will be conducted between 12.00 pm and 12.30 pm as per the revised guidelines on Term Repo Auctions issued on February 13, 2014.