The debt market is currently reeling under incremental supply pressure, which has hardened yields on the far side of the curve. However, the increasing liquidity pressure in the system due to Rupee stabilization may prompt RBI to announce OMO measures. This may additionally assist the RBI to cushion the yields from hardening further. Another market factor has been the renewed depreciation in the Rupee value, which has negated the concurrent decline in the Brent prices. However, were the Brent prices to slide further from current levels, the latent inflationary pressure in the economy may reduce, providing increased monetary maneuverability to the central banker in wake of moderating growth.
For now, the market is in a state of flux regarding the issuance of the new 10 year benchmark in G Secs. The 10 year G Sec is trading at 8.66% and if at this juncture the RBI issues a new 10 year G Sec, we could see the market rally as money finds its way into the new G Sec.