Skip to main content

RBI Trims its Gilt Holdings as Rates Rise in US

By
The Reserve Bank of India is trimming its holding of US Treasuries joining many other emerging economies which have been selling off US bonds amid rising rates. Yet, it figures in the list of top-15 foreign lenders to the US government. RBI sold $16.3 billion worth of US treasury (USTs) bonds since April with its stock slipping from $157 billion as of March-end to $140 billion as of August-end, according to the latest data released by the US Treasury department. In the same period, China sold USTs worth $22.6 billion, while Taiwan sold $6.9 billion worth of USTs. This could be to reduce their mark-to-market losses as bond prices fall when interest rates rise.
In India’s case, it is also due to the fact that RBI needed US dollars to sell in the market to stop the steep currency slide. The Indian central bank sold foreign currencies worth $18.6 billion in the spot market since April to rein in the value of the rupee. Foreign portfolio investors have pulled out more than $10 billion of their investments in Indian markets since April. This has resulted in the rupee losing more than 10% in value against the dollar. “If FPI flows do not revive amid an USChina trade war, the RBI may need to sell another $10-15 billion by March,” stated a report by Bank of America Merrill Lynch. There could be more pressure on RBI to sell its holding of US bonds to meet dollar demand.
The Reserve Bank could also be using a part of the sales proceeds of USTs to buy gold as it is seen as a hedge against volatile currencies. During the same period, RBI has bought 6.3 lakh troy ounce worth of gold. The outstanding stock of gold in its reserves rose to 18.64 million troy ounce in August from 18.01 million troy ounces in March 2018, according to data submitted to the IMF. Of the $400 billion worth of foreign currency reserves as of August 2018, $239 billion is invested in top rated sovereign bonds, $20 billion is in gold and the balance is parked as cash with foreign central banks, commercial banks and multilateral agencies.

The Economic Times, 22th October 2018

Comments

Post a Comment

Popular posts from this blog

Data storage norm splits digital payments industry

By
Data storage norm splits digital payments industry  India’s nascent digital payment industry could be thrown into disarray due to the demand by the Reserve Bank of India (RBI) that all user data be stored within the country, fears an industry grouping, which has termed the decision as “heavy-handed”, even as others, including the country’s largest digital payment provider Paytm, have hailed the move.  In a bid to narrow the growing schism, the industry is planning to send a formal representation to the regulator highlighting its concerns, a top official told ET.  “We are trying to build a consensus on the issue," said the person adding that the representation to the central bank will be ready this week.  RBI on April 6, mandated all payment companies—global and local—to set up data storage facilities within India by October. The stringent six-month deadline has attracted the ire of several sections of the industry that fear it will lead to a disruption of wel...
18 comments
Read more

Offer’s for all of you

By
Great Bumper Dhamaka Offer’s for all of you... It's Time to see your Business Online, WebeCreator Offer Website Designing with domain & Email @ nominal charges. For a year For More information visit us http://goo.gl/KlpppF call on 9890151261/9773197533  drop a mail to sales@webecreator.com
Post a Comment
Read more

Sebi to finalise options in commodities today

By
The Commodity Derivatives Advisory Committee of the Securities and Exchange Board of India ( Sebi) will meet on Friday with senior officials of the latter, to give a final shape to the rules on options trading in commodity futures, beside revising the warehousing norms to ensure good delivery on settlement. The decision taken, after discussing with the advisory committee, will be placed before the regulator’s board, to finalise the regulations. According to knowledgeable sources, three commodities in each segment, agricultural and non- agricultural, have been proposed for introducing options. It appears commodities from the soya and guar segments are preferred in the former. From the non- agri segment, it is likely that gold, silver and crude oil will be finalised. All these These have better liquidity and both the National Commodity and Derivatives Exchange and the Multi Commodity Exchange, respectively, will be able to introduce the options. In the equity segments, options ar...
17 comments
Read more