Halister News

(Bloomberg) -- Indian 10-year bond yields may fall below year-to-date low of 6.772% near-term if RBI, which many analysts expect to hold rates, adopts a dovish stance to support growth given declining inflation, Bloomberg strategist David Finnerty writes.

• RBI will leave its repurchase rate unchanged at 6.50% according to 19 of 34 economists in Bloomberg survey; 14 forecast a cut of 25 bps and one a reduction of 50 bps; decision due Oct. 4
• Will be first RBI meeting with new monetary policy committee; MPC has inflation target of 4% with upper tolerance of 6%
  • India’s Aug. CPI eased to 5.05% y/y from 6.07% in July
• Dovish stance may be adopted not only because of declining inflation, but also because Indian 2Q GDP fell to 7.1% y/y from 7.9% in 1Q, lowest growth reading since 1Q 2015
• Yields have fallen as overseas funds seek Indian bonds due to their relatively high yields
  • Fed’s lowered interest-rate dot plot should add to demand for Indian bonds
  • Global funds were net purchasers of $4.6b of Indian bonds in 3Q
• NOTE: Indian yields are vulnerable to move higher in short- term if there is an escalation of tensions between India and Pakistan
• NOTE: David Finnerty is an FX strategist who writes for Bloomberg. The observations he makes are his own and are not intended as investment advice.