Yields go up with 25 bsp rate cut by RBI momentum
Despite a 25 bps rate cut by the RBI, bond yields may rise as markets price in inflation risks and economic signals, creating mixed momentum.
Yields go up with 25 bsp rate cut by RBI momentum
Mumbai, Dec 05
The RBI delivered the widely anticipated 25 bps repo rate cut to 5.25 per cent here on Friday.
Talking to Bizz Buzz, Venkatakrishnan Srinivasan, Managing Partner of Rockfort Fincap says, “Rate cuts are not the only tool. It is one of the tools. We have witnessed yields came down more than 100 basis points without rate cut and now yields went up even after 100 basis points.”
RBI has many other tools to manage yields if supported by external factors and rupee. OMO and Swaps - definite positive.
According to him, “Wait and watch things like 10 year G-sec yield movement and Rupee movement.”
However, bank revision of FD rates doubtful- in fact it can inch up at least for senior citizens if not for others- subject to Small savings scheme rates remains the same.
After maintaining a neutral stance for the last two MPC meetings, a 25-bps rate cut is on the expected lines, making a total of 125 bps repo rate cut this calendar year.
Of course, with today’s 25 bps cut 10-year yields went down a bit as of now.
Rajeev Sharan, Head – Criteria, Model Development & Research, Brickwork Ratings says, “By cutting the repo rate by 25 bps to 5.25 per cent while maintaining a neutral stance, the MPC has clearly prioritised sustaining growth without losing sight of its 4 per cent inflation target.”
The move should bolster investment and consumption into 2026, reinforcing our FY2026 real GDP projection of 7.2 per cent. From a credit rating lens, the move should ease borrowing costs and shore up debt-servicing capacity, which is mildly credit positive for high-leverage corporates and interest-sensitive sectors. Having said that, a vigilant monitoring of external risks remains essential.
Madhavi Arora, chief economist, Emkay says that INR’s softness should not be read as rate-easing deterrent ahead, but a natural growth stabiliser.
Tribhuwan Adhikari, MD & CEO of LIC Housing Finance says, “Today’s MPC raised the GDP growth projection for FY26 to 7.3 per cent, higher than the earlier estimate of 6.8 per cent which is positive for housing demand and home-buying sentiment due to stronger income and job visibility in the coming year.”
We anticipate a positive growth in the affordable and mid-segment housing in the upcoming quarters contributing to an overall healthy pick-up in consumer sentiment, he sa
