‘Bond may trigger out of caution’

More than a year after the US 10-year Treasury yield, the Federal Reserve’s dovish policy stance was clearly not taken into account by investors for inflation risks, the Reserve Bank’s latest Viewed as an article in the monthly edition. India’s bulletin cautioned that bond vigilance could weaken a global economic recovery, ‘destabilize financial markets and boycott capital from emerging markets’.

Michael D., deputy governor of the Reserve Bank. RBI officials, led by Patra, wrote in March, “The Reserve Bank strives to ensure a gradual growth in yield conditions, but Tango and Forendall are known as a oven.” Bulletin.

Noting that with the countries to increase their population, the global economy should regain the lost momentum in the second quarter, RBI researchers stressed that bond vigilance was riding again, “by statute governments and central Banks are trying to implement law and order but this time around it, they can weaken the economic recovery and unstable financial markets ”.

“2021 growth forecasts are confirmed, as they have long-term inflation spectators, as the enemy of bonds it erases the real value of fixed income that they provide,” he said. Wrote

“Fears over US interest rates are already looming on emerging market economies (EMEs). Investors have started withdrawing money from EME stocks and bonds, ending a streak of uninterrupted flows from October 2020, ”it added.

The RBI article cited the Institute of International Finance (IIF), stating that foreign investment had led to a negative shift in emerging market equities and debt since late February, ‘bringing back the fear of the 2013 tapering tantrum’. .

“While the external equilibrium and debt profiles of many emerging economies are in a better position today than in 2013, they are not immune,” the article’s authors warned.

India’s S&P BSE SENSEX and NIFTY Equity indices fell more than 1% on Thursday, extending its slide in five straight sessions amid concerns about fund outflows and resurgence of the COVID-19 transition in the country We do. However, Benchmark made some losses on Friday after finishing the session with a profit.

Referring to growing cases, RBI officials cautioned: “India is ready with two tipping points. First, there are ominous signs that infections are increasing. A second wave? Time will tell. On the other hand, vaccination has expanded beyond health workers to senior citizens, but at 3.3 crore on 16 March, the whole process needs to be expedited. ”

The authors of the article also characterized building price pressures as another tipping point. “Second, inflation has seen reverse pressure. In fact, excluding vegetables, headline CPI inflation has moved into a tight range of 5.8 to 6.4% since June, testing the upper tolerance band of the inflation target. Global oil markets are experiencing a tightening of prices and production. Telling multi-year highs about input prices creates a dilemma – if they are given to companies as pricing for consumers as aggregate demand rises, then higher inflation will also occur; If they are held back, profitability will cease as gross value will be added to the economy. India is in a bizarre place – a lot amid rising prices. “

Despite this, he said there was a restless urgency in the air to resume high growth in India, “with indications that the capex cycle is uncoiling and turning, and the earnings results of corporate expectations beat market expectations Are. “