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RBI brings forward closure of dollar deposit window to end-August

BNY says the earlier end date cuts expected INR liquidity and pushed 5-year and 10-year Indian bond yields higher by up to 9bp and 4bp, respectively.

Reported · Written up by our desk · EM Currencies

BNY’s Geoff Yu says India’s bond market sold off after the Reserve Bank of India advanced the closure of its special Dollar deposit window to end-August.

The change reduces anticipated Indian rupee liquidity, which can slow reserve accumulation and weigh on Rupee appreciation as authorities become more wary of potential future liabilities and forward-premium costs, according to the note.

The facility had already attracted more than $50 billion, Yu said, and will now close at the end of August rather than a month later.

BNY noted that the move lifted 5-year and 10-year yields, with 5-year yields rising as much as 9bp to 6.44% and 10-year yields climbing 4bp to 6.80%.

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