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Corporate bonds get a boost

Targeted long term repos operations raise their exposure to corporate bonds and other debt instruments

Our Special Correspondent   |   Mumbai   |   Published 27.03.20, 08:08 PM

The RBI on Friday announced a new tool — targeted long term repos operations (TLTROs) — which will not only provide liquidity to banks but also raise their exposure to corporate bonds and other debt instruments, which have seen a flight of foreign portfolio investment on account of the coronavirus.

The central bank has mandated that banks who avail funds under this scheme have to compulsorily invest them in investment grade bonds.

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Such investments will be treated as held-to-maturity (HTM), which means that banks will not have to mark-to-market the investments on these bonds.

The move comes at a time the coronavirus pandemic has resulted in foreign portfolio investors (FPIs) taking money out of the domestic bond markets. With these debt instruments turning unattractive, yields of even AAA rated papers have inched up. So far in this calendar year, the foreign investors have sold bonds worth Rs 65,000 crore.

Offshore rupee trade

The RBI allowed banks to participate in offshore non-deliverable forward (NDF) rupee markets with a view to contain volatility in the domestic currency.

The ongoing financial market volatilities triggered by thehe coronavirus outbreak dragged the rupee to touch lifetime lows and also breach the 75-mark against the dollar before gaining some lost ground in the last few days. 



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