RBI Should Start Issuing Floating Rate Bonds

We Feel It's Time to Restart Floating Rate Bond Issuances Keeping Overall Development of the Market in Mind

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Considering the demand-supply mismatch in the bond market, RBI should start issuing floating rate bonds (FRBs), believes Amit Tripathi, president and CIO—fixed income, Nippon India Mutual Fund. He tells Christina Titus that FRBs are the best asset-liability management products that banks can own. Excerpts:

As the final GST reforms have been announced, what is the market inferring from it?

The revenue implication of ₹48,000 crore turned out to be lower than the market expectation, which led to a fall in yields. The small extrapolation from FY24 to FY26 will not be a worry for the market.

Further, the tweaks in GST slabs will have a greater impact on inflation than earlier anticipated. GST on regular consumables and other items like packaged food, which have a meaningful weightage in the CPI basket, has been reduced to 5% from 18%. Therefore, the expected impact on headline inflation could be as high as 70-80 bps compared to 40-60 bps estimated earlier. On GDP/aggregate demand, one can expect a net positive impact, though there are many other moving parts there.