RBI MPC likely to keep policy rates unchanged in forthcoming policy meeting
Synopsis-In the scenario of falling inflation and favourable economic growth rates, status quo on policy rates is expected from the central bank�s policy meeting.
The RBI MPC meeting is going to be held from 6th to 8th this month. The central bank is likely to maintain the status quo on the policy rate in the wake of consumer inflation staying in its comfort zone and economic growth moving at an accelerated pace. However, it is yet to see the monetary policy stance. As announced earlier by the central bank, OMO sale of g-sec has not been conducted yet. Therefore, it is expected that forthcoming policy outcomes may give guidance for it. As of 30th Nov, system liquidity stood at Rs 487 billion of deficit.
India�s consumer inflation eased to 4.87% in October from 5.02% in the previous month which is close to average inflation target set by the central bank i.e. 4 %. Domestic GDP growth rate stood at 7.6% during Q2FY24 as compared to 6.2% during Q2FY23.
India�s fiscal deficit stood at 45% during April-Oct 2023 as compared to 45.6% during Apr-Oct 2022.
Government bonds, SDL and OIS yield movements
During the past week, there were several notable changes in bond yields:
The yield for the 10-year benchmark 7.18% 2033 bond yield rose by 2 bps to 7.29%. Similarly, the 7.26% 2033 bond yield increased by 2 bps to 7.33%. The 7.06% 2028 bond's yield gained 1 basis point to 7.27%. In the same line, the long-term paper, represented by the 7.25% 2063 bond, its yield increased by 6 bps to 7.54%. 50-year paper, 7.46% 2073 yield stood at 7.38%.
The spread between the 10-year and 5-year bonds stood flat at 2 basis point as compared to 1 bps in the previous week. The spread between the 15-year benchmark and the 10-year benchmark rose to 14 bps from 12 bps. Additionally, the spread between the 30-year benchmark and the 10-year benchmark rose to 25 bps from 21 bps as compared to the previous week.
In terms of the 10-year SDL auction, the average cutoff yield rose to 7.75% as compared to 7.67%, while the spread increased to 48 basis points from 40 basis points.
Lastly, in the Overnight Indexed Swap (OIS) rates, the 1-year OIS yield declined by 4 bps to 6.88%, while the 5-year OIS yield decreased by 7 bps to 6.53%.
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