BENGALURU: Bond prices slumped by around Rs 1.5-2 after the repo rate was left unchanged. The Monetary Policy Committee’s decision came as a huge disappointment to bond dealers, who had expected a cut of at least 25 basis points.
The rally triggered after demonetisation and fuelled by rising expectations of a rate cut has come to halt. “This is a nothing but a correction, because not many were expecting a status quo,” a dealer with a private bank said. “Bonds have been ignoring many triggers and went on a rally, they are paying the price now,” he added.
According to Rakesh Sharma, CEO and MD, Canara Bank, RBI has kept the rates unchanged due to inflation related risks and this will ensure stability to the currency. “However, they have rolled back the temporary measure which impounded 100% of incremental NDTL (Net Demand and Time Liability) by means of CRR (Cash Reserve Ratio). The revised Market Stabilization Scheme will ensure banks get a yield on new deposits,” he added.
According to most dealers, prices are expected to fall further before consolidating ahead of the US Federal Reserve’s policy meet later this month.