RBI’s change in stance rattles bond market

Cooling CPI and tepid growth fuel rate cut hopes

- MAHESH NAYAK

INVESTOR CONFIDENCE IN the Indian bond market has weakened since the Reserve Bank of India’s (RBI) June policy, as markets struggle to reconcile the central bank’s rate cut with its simultaneous shift to a neutral stance,said Murthy Nagarajan, head of fixed incomeat Tata Mutual Fund.

“The market feels the Reserve Bank of India has spoken,but action hasn’t followed,” said Nagarajan, pointing to a growing disconnect between policy signalling and market behaviour. Since the June monetary policy,the benchmark 10-year government security (G-Sec) yield has climbed from a low of 6.10-6.15% to hover around 6.50%.