As per market expectation, RBI has continued the pause on policy repo rate considering current economic scenario. As 1-year OIS yield is more than 5-year OIS yield, the yield curve is expected to continue to remain flat to inverted as the monetary policy committee has decided to remain focused on withdrawal of accommodation to control inflation.
Inflation-India’s consumer inflation fell to touch an 18-month low level at 4.70% in April. On the assumption of a normal monsoon, inflation is expected to remain moderate in coming months. As per RBI’s estimation, domestic inflation is likely to remain at 5.1% for FY24.
Liquidity-System liquidity has regained surplus level since April 23. As of 8th June 23, it stood comfortable at Rs 2007 billion.
Indian Rupee-Following RBI’s policy outcomes, domestic currency stood at Rs 82.45 per USD.
FII Flow-During FY24, India’ capital market has received USD 8886 million so far. Debt market segment has received USD 904 million.
Fiscal Deficit- India’s fiscal deficit has stood at 6.4% for FY23 as budgeted by the Union Government driven by higher tax collection. During FY23, direct tax collection stood at Rs 16.61 trillion while GST collection increased by 22% on yearly basis to Rs 18.1 trillion.
Government bonds, SDL and OIS yield movements
On a weekly basis, the 10-year benchmark 7.26% 2033 yield rose by 6 bps to 7.04% while 7.26% 2032 yield increased by 5 bps to 7.07%. 7.06% 2028 yield gained 8 bps to 6.97%. 5.63% 2026 yield rose by 10 bps to 6.95%. Long-term paper, 7.40% 2062 yield rose by 6 bps to 7.24%.
The spread of 10-year bond over 5-year bond decreased to 7 bps from 9 bps as compared to the previous week. The 15-year benchmark over 10-year benchmark declined to 8 bps from 10 bps while the 30-year benchmark over 10-year benchmark spread stood unchanged at 20 bps on a weekly basis.
10-yr SDL auction cut-off yield declined to 7.33% from 7.37% in previous week while spread stood unchanged 36 bps as compared to previous week.
On a weekly basis, 1-year OIS yield rose by 7 bps to 6.64% while the 5-year OIS yield increased by 16 bps to 6.15%.
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