Will slowing GDP growth trigger early rate cuts by the RBI?

Weekly Market Highlights:

1. The 10 year 2034 G-sec yield was stable at 6.87% over the week as FPI inflows stood strong in August 2024.
2. Weekly Gsec auction cut-off for the 2034 and 2054 stood at 6.8711% and 7.0266% respectively.
3. 3M and 6M T-bill auction data yields were at 6.63% and 6.72% respectively, up by 2 bps on a weekly basis.
4. The INR Bonds high yield Index stood at 9.628% down 7 bps biweekly basis.
5. India's economic growth rate moderated to 6.7% in the April-June quarter. In its August monetary policy, the RBI revised India's growth forecast for this period down by 20 basis points to 7.1%, citing muted government capex as a key factor.
6. US treasury rates rose in anticipation of employment data next week, as weak numbers only strengthen possibilities for a larger rate cut in FED’s September policy meeting.
7. The US core PCE price index, the FED’s preferred inflation measure, rose by 0.2% in July 2024 from the previous month, matching market expectations and June’s increase. Annually, core PCE prices rose 2.6%, slightly below the 2.7% consensus, supporting the case for potential rate cuts by the Federal Reserve.
8. Gold prices have regained some of their lost ground after rebounding from the weekly lows in the sub USD 2,500 per ounce range. FED’s interest rate cuts could boost gold demand, as lower interest rates reduce the opportunity cost of holding non-yielding gold.
9. The 10-year U.S. Treasury yield rose to 3.90% from a monthly low of 3.74%. The yield spread between the 2-year and 10-year Treasury notes, a key growth indicator, is set to un-invert under disinflationary and potentially deflationary pressures since July 2022.