High Global Yields Make Indian Bonds Unattractive for Now: SBI MF CIO

SBI Mutual Fund CIO Rajeev Radhakrishnan says Indian government bonds may not attract foreign inflows in the near term due to rising global yields.

According to Rajeev Radhakrishnan, CIO for fixed income at SBI Mutual Fund, Indian G-secs are not going to draw in foreign capital anytime soon because of the high worldwide yields. He informs Christina Titus that transmission has been somewhat hampered by the Reserve Bank of India's (RBI) shift in position.

The recent policy brought about several quite unexpected actions. The largest surprise was the lowering of the cash reserve ratio (CRR), which was done on a forward basis. The change in stance and the 50 basis point repo rate cut were both unexpected. However, in retrospect, front-loading movements have merit since they facilitate speedier transmission.

However, some of the market's recent transmissions were somewhat muted by the entire discourse surrounding the stance change. The transmission was neutralized by a 20–25 basis point increase in short-end bond yields. However, it significantly decreased when you look at the yields from a year or even three months ago.

The question of what the RBI's operating aim is—whether it is close to the Standing Deposit Facility or between the SDF and the repo—remains unanswered. Right now, the overnight rate is trading below SDF due to a huge liquidity boom. They don't seem to be in a rush to align with the repository. Rajeev would like to wait for additional actions and clarification regarding the frequency of VRRR before making that determination.