Halister News

(Bloomberg) -- India’s short-term rates are close to lower bound of RBI’s policy corridor and a further fall in absence of rate cuts is unlikely, Ashutosh Datar and Amit Tiwari, economists at IIFL, write in note.

• “With inflation close to the upper bound of RBI’s comfort zone, policy rate cut is unlikely in the near-term, implying little or no room for further decline in bond yields from current level,” the economists write
• NOTE: RBI has a 50 bps policy corridor with reverse repo at lower band of 6% while repo rate is the upper band at 6.5%
• Spread between 10-year and 3-month govt bonds has widened to 77 bps in July from 71 bps in June, 40 bps low in March: IIFL
  • This is in sync with view that as monetary policy easing comes to a close, markets will increase the term premium built into the yield curve
• Yield on 7.59% 2026 govt bond rises 4 bps to 7.22%, up 8 bps so far since yday; yield had dropped 28 bps in July