HALISTER1: India 12-Month Bond Outlook Lowered to ‘Neutral’ at StanChart

India 12-Month Bond Outlook Lowered to ‘Neutral’ at StanChart

(Bloomberg) -- India’s 12-month bond outlook has shifted to “neutral” from “positive”, Nagaraj Kulkarni, senior Asia rates strategist at Standard Chartered Bank writes in note dated Jan. 6.
  • 2017 likely to be a tale of two halves for bond market
    • Govt bonds to rally in 1H 2017 on monetary policy easing; a likely 50bps repo rate cut should result in a decline of ~20bps in 10-year yield
    • Bond yields to rise in July-December as impact of demonetisation drive fade and a cyclical pick-up in inflation is likely in 2H 2017
  • Monetary tightening unlikely in 2017 as headline inflation is likely to remain within RBI’s target range of 2-6% with 4% being the medium-term target
  • Expects yield curve to steepen in 2H 2017, signaling the end of the current monetary easing cycle and reflecting unfavorable demand-supply dynamics
  • 3-month outlook on govt bonds is “positive”
  • Yield on 10-year govt bond rises 3bps to 6.42%
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

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Nagaraj Kulkarni (Standard Chartered PLC)

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