INSUBCONTINENT EXCLUSIVE:
Mumbai: The Reserve Bank of India's (RBI) much needed liquidity injection and rate cuts provide some relief to debt funds which were
the coronavirus-induced crisis with a whopping 75 basis points cut in the repo rate, bringing it down to 4.4 per cent, its lowest ever.
The
central bank also announced targeted LTROs (TLTRO) at monetary policy review and said it will help in reducing the yields on corporate bonds
which have been reeling under pressure in recent times amid low volumes.
The RBI said it will conduct auctions of targeted term repos of up
to three years' tenor of appropriate sizes for a total amount of up to Rs 1 lakh crore at a floating rate linked to the policy repo
rate.
Liquidity availed under the scheme by banks has to be deployed in investment-grade corporate bonds, commercial paper, and
non-convertible debentures over and above the outstanding level of their investments in these bonds as on March 27, 2020, it said
These also have to be held to maturity.
Nimesh Shah, managing director and CEO of ICICI Prudential Mutual Fund said the TLTRO worth Rs 1
enhancing liquidity in corporate bond markets and consequently will lead to easing in short-term bond yields of high-rated corporate bond
adjustment facility) corridor, discouraging banks to park funds with RBI as they want them to avoid risk aversion.
According to Dwijendra
Srivastava, CIO-Fixed Income, Sundaram Mutual Fund, the shorter end of the curve will realign to the new repo rate, or even reverse repo
added.
Currently, medium-term funds will benefit the most, he said adding that going ahead, long and medium duration funds will benefit as
well.
Others shared the view.
Lakshmi Iyer, CIO (Debt) - Head of Products, Kotak Mutual Fund, said the RBI has intended to infuse liquidity
not only into the banking system but also into the corporate bond markets.
Iyer pointed out that TLTRO is a step in that direction, and is
expect the reverse repo rate to be the operating rate for sometime