India's Debt Rating Upgrade Oddly-Timed, But Who's Complaining?
Rating upgrade by Moody’s seems to be just what the doctor ordered for India’s battered bond and currency markets.
(Bloomberg) -- For India’s battered bond and currency markets, the rating upgrade by Moody’s Investors Service seems to be just what the doctor ordered. Yet, the timing of the move is being questioned.
Moody’s decision comes when rising crude oil prices and concern over fiscal slippages is seen making matters worse for policy makers already grappling with slowing economic growth.
“The timing is a surprise given concerns regarding the fiscal metrics right now,” said Sue Trinh, head of Asia foreign-exchange strategy at RBC Capital Markets in Hong Kong. “It’s a nod to strong progress in structural reforms.”
For the markets though, the feel-good factor and prospects of more foreign inflows into stocks and rupee bonds due to the upgrade will drive focus away from the headwinds, even if temporarily.
The rupee surged as much as 1 percent, the most intraday since mid-March, to 64.67 per dollar. India’s benchmark 10-year sovereign bond yield tumbled 10 basis points to 6.96 percent after climbing to a 14-month high on Thursday.
READ: India Bond Market Impact of Upgrade Likely to be Fleeting: DBS
As Mizuho Bank Ltd.’s Vishnu Varathan says: the rupee will almost certainly “celebrate this windfall” upgrade. Bond investors too, may count Moody’s move as a blessing and look to ride the rally while it lasts.
To contact the reporter on this story: Subhadip Sircar in Mumbai at ssircar3@bloomberg.net.
To contact the editors responsible for this story: Tan Hwee Ann at hatan@bloomberg.net, Shikhar Balwani
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