The flat to inverted shape of the yield curves can change quickly if the Reserve Bank of India (RBI) signals a softening of its stance on inflation. The market at this juncture does not expect a softening of the RBI’s stance on inflation and is content shorting the short end of the curve. Given the nature of the curve, the RBI’s future moves will be watched closely by the market. An unwinding of spread inversion trades will cause yields curves to move violently.....
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