Sunday, September 13, 2020

Indications from Bond Yields in India for savers in Fixed income returns products

 Just couple of weeks ago, everyone was surprised by the absence of RBI in the market when the yields moved upto 5.97% and now all of a sudden 179/180 bn INR of 10-year benchmark bond was purchased by primary dealers. Still prices of bonds increased ?? Very strange

The hint lies in the yields of 6.02% which seems is not comfortable level with RBI. It seems RBI has put its foot down on yields and market has sniffed the discomfort of RBI.

Also, it also indicates that there are concerns around oversupply of Govt. debt in India and that 12 tn INR plan is still on the books. 

Anyway, it seems the real inflation will cross 7% sooner or later. What this means for savers and retail investors in fixed income products

Effectively fixed income products are giving negative returns of around 1.5% (5.5%-7.0%). There are losers and winners due to this negative real rate of interest. 






No comments: