RateView

One-month view 

Our August review is based on expectations of lower inflation and benign oil prices amid slowing global growth, which offsets the impact of geopolitical uncertainties. 

Other factors that could drive the yield include market liquidity, which averaged ~Rs 3.04 lakh crore in July, the outcome of possible trade negotiations with the US, and foreign capital inflows, which have been volatile in recent months. 

Three-month view 

Chances of the Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) cutting the repo rate in its October meet appear bleak after the central bank announced a pause and indicated any further intervention would be data dependent. However, we do expect swifter transmission of earlier rate cuts as the RBI manages liquidity effectively. Headline retail inflation is expected to remain benign (1.55% in July), supported by low food inflation and commodity prices. Other factors that could affect the yield include market liquidity, re-negotiation of the US tariff imposition, foreign portfolio investor (FPI) inflows and the US Federal Open Market Committee’s decisions. 

Framework for the outlook

We provide the outlook on key benchmark rates for different debt classes - 10-year government securities (G-secs), state development loans (SDLs) and corporate bonds - based on statistical models and inputs from our in-house experts. We also incorporate our views on policy expectations, macroeconomic outlook, key events (local and global) and market factors (liquidity and demand/ supply).