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    GSAP program ensures long term yields kept under control: Axis MF’s R Sivakumar

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    GSAP program ensures long term yields kept under control: Axis MF’s R Sivakumar

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    The Monetary Policy Committee (MPC) of the Reserve Bank held the repo rate at 4 percent in the April policy and retained its accommodative stance for as long as necessary amid rising inflation and elevated inflation.

    The Monetary Policy Committee (MPC) of the Reserve Bank held the repo rate at 4 percent in the April policy and retained its accommodative stance for as long as necessary amid rising inflation and elevated inflation.
    The central bank also announced a secondary market G-Sec acquisition programme. Talking about the same, R Sivakumar, Head of Fixed Income at Axis Mutual Funds said, “The statement, we are looking at it in two parts one is much of the same which is keeping the rates unchanged and stance unchanged, but the key thing is this new program which is giving guidance on the total quantum of G-Sec purchase. This is the first time that they have given that kind of quantum of purchase and it has been tied in with two other parts. One is an explicit statement that they would want the yield curve to be orderly, in some sense the government is trying to bring down the term premium and also looking at the other end the money market end, looking at increasing potential size and the tenure of the variable rate reverse repo auction so remove liquidity at the short end."
    "This is actually to be read into two parts - removal of liquidity in certain tools or providing longer-term liquidity so in effect they really want to flatten the yield curve, so it a large change,” he added.
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    Talking about the borrowing program, Amandeep Chopra - Group President and Head of Fixed Income at UTI Mutual Funds said, “Markets were expecting some strategy to ensure that there is a smooth auction calendar and that has really come out with this G-Sec acquisition program (GSAP) program. I don’t see any issue right now in terms of first-quarter borrowing. If you look at where the yields have moved they already are reflecting with 10-Year yield now well below 6.10 so I think that is a clear indication that markets are not concerned anymore.”
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