Tuesday, March 29, 2011 11:09 Hrs IST
We Expect Money Market Rates To Continue To Trend Lower In April & May
DSP BlackRock Mutual Fund – Fixed Income Market Outlook
Bond market participants are cautious amid tight liquidity conditions, high credit offtake, geo-political uncertainties, worsening current account deficit and rigid headline inflation.
We expect benchmark 10 Yr yield to move downward initially due to higher demand for the new 10Yr Benchmark before reversing the course.
Geopolitical risk is a major concern, directly tied into oil and FII flows. High oil prices could upset the fiscal balance while the volatility in FII flows could push up the current account deficit. This could lead to corporate spreads widening from their current levels.
Money market rates have seen some softening on expectations of easing liquidity post March end. We expect money market rates to continue to trend lower in April and May due to improvement in liquidity conditions.