RBI MPC Meeting in Spotlight Amid India’s Weaker-Than-Expected GDP Growth

Weekly Market Highlights:

1. The 10-year 2034 G-sec yield edged down 8bps to 6.74% for the week.
2. 3M and 6M T-bill auction data yields were stable at 6.49% and 6.66% respectively.
3. The INR Bonds High Yield Retail Index stood at 9.73%, down 19 bps fortnightly.
4. India's GDP grew 5.4% in Q2FY25, falling short of the RBI's 7% forecast, raising economic concerns. This puts pressure on the RBI to cut rates in its December policy meeting.
5. India's fiscal deficit reached Rs. 7.5 T, 46.5% of the FY25 target, during April-October. The Union government aims to reduce the fiscal deficit to 4.9% of GDP by March 2025, down from 5.6% last year.
6. Banking system liquidity turned negative after two months, driven by a Q3FY25 BoP deficit, a widening trade gap, and increased FPI outflows since October. Currently the banking liquidity is at a deficit of Rs. 9.5 billion.
7. G-Sec yields to be driven by RBI MPC meeting outcome on 6th December. The 10Y G-Sec yield has fallen by 8 bps over the week as market discounts the probability of a RBI rate cut next week.
8. The US economy grew at 2.8% in Q3, driven by strong consumer spending and exports, down from 3% in Q2, marking over 2% growth in eight of the last nine quarters. The 10Y UST currently at 4.17%, will be driven by job data next week.