RBI is expected to increase the interest rates by ~25 bps in its review meet on June 16, 2011.
The move is expected on the back of rising inflation levels in the country. The Inflation levels reported are at an high of 9%, which is above market expectations of 8.5%.
The increase in the interest rates is primarily to arrest the rising inflation levels. Having said this, any rise in the interest rates higher than 25 bps could be considered as aggressive move by the RBI and also seems unlikely.
In the light of the above, the movement in the bond markets, specifically the 10 yr. G-sec paper could be worth tracking. However, we feel that if that if that if the rate hike happens to the tune of 25 bps than the bond prices should not be affected either ways substantially. In case if the rate hike is above the expectations, than we might see some movements in the bond prices and hence the yields.
The move is expected on the back of rising inflation levels in the country. The Inflation levels reported are at an high of 9%, which is above market expectations of 8.5%.
The increase in the interest rates is primarily to arrest the rising inflation levels. Having said this, any rise in the interest rates higher than 25 bps could be considered as aggressive move by the RBI and also seems unlikely.
In the light of the above, the movement in the bond markets, specifically the 10 yr. G-sec paper could be worth tracking. However, we feel that if that if that if the rate hike happens to the tune of 25 bps than the bond prices should not be affected either ways substantially. In case if the rate hike is above the expectations, than we might see some movements in the bond prices and hence the yields.
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