The market has emitted mixed signals on the future course of interest rates following the monetary & credit policy announcements made on April 29 by the Reserve Bank of India (RBI).
While the refrain seems to point to a softening trend, some participants presage a structural change in interest rates.
These are of the view that the rates have bottomed out and yields could firm up in the coming weeks. The RBI has also hinted that interest rates may have bottomed out for now.
The lower cut-off at the auction of 20-year government paper on Saturday has set the stage for yields to turn northward.
At the same time, a higher cut-off for the 10-year paper will result in yields on medium-term papers of 10-15 years tenor ruling easy.
Some participants perceive that liquidity in the system has reduced. The average daily inflows into the repo market last week stood at Rs 23,775 crore, lower than the week before
