Benchmark Indian bond yields are expected to ease slightly over the next three months, driven by favourable inflation data and stable oil prices, a report said on Wednesday.
The 10-year government bond yield, which stood at 6.59 per cent on August 31, is expected to inch down to the 6.42 per cent-6.52 per cent range by the end of September and to 6.38 per cent-6.48 per cent by November end, said the report from research firm Crisil Intelligence.
State development loan yields are expected to ease from 7.23 per cent to the 7.15 per cent-7.25 per cent range by November, while 10-year corporate bond yields may fall from 7.19 per cent to the 7.08 per cent-7.18 per cent range.
Crisil reported that benign oil prices are offsetting the effects of geopolitical risks and a slowdown in global growth. Key factors influencing yields are the upcoming US Federal Open Market Committee decision, domestic market liquidity averaging Rs 2.84 lakh crore in August, ongoing US-India trade negotiations, and volatile foreign capital inflows.
Between July 1 and September 8, Foreign Institutional Investors sold Indian equities totalling Rs 1.02 lakh crore, with Rs 7,800 crore sold in the first six sessions of September.
There is a low likelihood of the Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) cutting the repo rate in its October meeting, as the Central Bank has announced a pause and indicated any further intervention would be data-dependent, the report said.
Actual fiscal impact will be smaller than expected due to recent Goods and Services Tax (GST) rationalisation, it added.
India’s Q1 GDP growth reached 7.8 per cent, and the government’s decision to simplify the GST structure is set to release about Rs 50,000 crore into the economy, boosting domestic consumption.
SBI Capital Markets had recently said that fiscal stress in the US and the UK is adding complexity to global trade tensions, with rising debt burdens pushing bond yield curves steeper.
