The consumer price index (CPI) data for April is positive from a bond market perspective, said B Prasanna, head-global markets group at ICICI Bank in an interview to CNBC-TV18.
“The protracted trade wars which are right now happening is suggesting that the global environment is much more positive for bonds especially with the possibility of growth slowing down, high rate differential between the US and India as US yield fall and the Fed futures is also now pricing in the next move to be a cut; 100 percent probability of a cut by early next year,” he said.
"However, a lot of things have to pan out and there are uncertainties related to elections as well. So it’s not a clean case but yes, there are some positive green shoots which are coming up,” he added.
Talking about corporate bond market, he said, “There were expectations of a lot of liquidity buildup in the month of April, not just system liquidity but also liquidity from the mutual fund system which market was expecting will come and get into corporate bond papers.
“However, the expectation has been delayed because of various factors, including things like FDI outflows in the month of April. There was surplus dollar liquidity in the spot market, creating alternative sources of investments for banks and that money is not given to mutual funds and also credit concerns from retail. FMP portfolios meant that fresh inflows into mutual funds both from retail as well as from corporate treasuries did not come in as much as what was expected.
"So, from that perspective mutual funds have been buying corporate bonds much less than what was expected earlier,” added Prasanna.
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