“Lenders in the market also need to be able to go ahead and lend whenever there is a requirement.”Bhattacharya said she doesn’t expect any more repo squeezes. Investors such as banks and primary dealers borrow and lend fixed-income securities in the repo market. “By allowing shorting, market levels are allowed to reflect the views of all participants.”On two days in early March, India’s most-traded bonds became virtually unavailable in the repurchase market as banks refused to part with the securities. A similar situation occurred again in early April.“I think there was a lot of shorting in the market and therefore there were lenders who didn’t want to go ahead and lend,” Bhattacharya said. “I think what needs to be done is there has to be more discipline on both sides.”

Source: Economic Times May 05, 2017 08:03 UTC