The RBI increased Repo rates to 8% (from 7.50%), a 50 basis point increase. Repo is what banks pay to borrow overnight from the RBI, a key rate that is usually the floor for inter-bank lending rates and thus interest rates in the system.

Reverse repo (or what banks get for parking money with the RBI) is now at 7.0%, up from 6.5%.

My earlier post talked about the strong language in yesterday’s first quarter review and thus the small (20%) chance that the hike would be more than the normal 0.25% which was more or less expected.

Here’s a quick historical repo rate chart. More analysis later in the day.

image

We are at the highest since November 2008 and have been higher only for five months (June to October 2008) when oil hit the $140 per barrel limit and then all hell broke loose with Lehman and co. I don’t think this is a predictor of a crisis (come on, a data size of one?).

Markets: Nifty has fallen 90 points (short of 2%) at 5590. BankNifty is down nearly 2.5%, and the CNX Realty index is down 3%.

The 10 year bond yield jumped from 8.30% to 8.38%. Overnight indexed swaps (OIS) stay flat at 8% for one year, and an inverted 7.57% for five years. This is not dramatic for the bond markets, yet.

More to come…

Related Posts Plugin for WordPress, Blogger...