BUSINESS
Welcome to the new bond order
India's bond market faces headwinds as Trump's tariffs and GST reforms create a complex macro environment, though favourable liquidity conditions may limit yield upside
BUSINESS
Rate cut vs market reality: Understanding the nuances in RBI’s policy communication
RBI's mixed signals following June's monetary policy review have left bond markets confused about India's interest rate trajectory, creating unexpected opportunities for savvy investors
BUSINESS
Indian Bond Market Resilience: Why oil price surge won't derail fixed income
Oil prices surging amid Israel-Iran tensions typically spell trouble for Indian bond markets, but structural economic reforms have dramatically reduced this vulnerability
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What’s ahead for bond investors?
Going forward, we see room for at least one more rate cut in April. If current growth sluggishness continues, we might see further rate cuts beyond April
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Is the falling rupee an opportunity or a risk?
The RBI’s liquidity play entwined with its forex interventions could be a boon for bonds
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Is the Indian bond market rally over?
Recent developments have made fixed income investors anxious about the market outlook. But the structural shift forecast for the bond market is not at risk
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What the inflation targeting framework missed
Food inflation cannot be ignored but can be kept as an ancillary factor rather than within the target
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Fiscal prudence from Budget would add to long-term bond market gains
While the budget would offer important cues to the bond market, there is a strong case for bond yields to be benign in the next 1-2 years
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The anatomy of inflation
Based on the current trend, the core CPI is likely to remain below 3.5 percent in FY25. Following the past trend, the headline CPI will likely converge to the core inflation over medium term
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What lies beyond the 4.5 percent fiscal deficit goal?
The government has set a target to bring down the fiscal deficit to 4.5 percent of GDP by FY26. This will require a reduction in expenditure growth from an 8.8 percent annual rate in the last three years to around 6 percent in the next two years
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Expected decline in bond yields creates an opportunity for investors
A shift in the monetary policy focus from inflation to financial stability can be favourable for bonds, making long term bonds attractive for investors
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Bond market has a favourable demand-supply balance ahead
The favourable demand-supply equation along with falling inflation should bring down long term bond yields once the geopolitical risks subside
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Looking through the noise in the bond markets
For long term yields to go even higher on a sustained basis would require incremental strengthening of economic activity and serious worsening of the future inflation trajectory
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The new phase of monetary policy should be: 'Do nothing'
Despite strong disinflation trends, RBI may stay put on interest rates for some time
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A case for RBI to pivot on repo rate
An expected drop in inflation, positive real rates and favourable external balances are some reasons that signal a pivot by the Reserve Bank of India
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This time around, the inflation trajectory is different
Much of the inflation this time is caused by supply chain disruptions. It will decline to 4-5 per cent without radical policy interventions
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Budget 2023: Fiscal math from the market’s lens
We expect increased issuance of long-term bonds, which means that market participants will have to absorb significantly higher duration or interest rate risk in their bond portfolio
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Investing in fixed income has turned red-hot again
After RBI’s rate hikes and reduction in liquidity, the tide is turning in fixed income markets to make 2023 a more rewarding experience for investors
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Bond is back
The real interest rate is no longer negative and fixed income is back as one of the effective tools to beat inflation
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What will stop the Fed?
The biggest risk central banks face at this moment is that they may have to stop tightening before getting inflation under control, thanks to financial stability risks
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Bond market’s liquidity conundrum
Given the foreign exchange outflows, the RBI will have to supply liquidity to the money markets. How it chooses to do so is critical for interest rates and for the bond market in the months ahead
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Bond Index Inclusion – A reality check!
Inclusion in global bond indices has led to the 10-year government bond yield coming down, at a time when global bond yields are rising. But even if the inclusion happens, it's unlikely to lead to large inflows immediately
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What will be the endgame for the current bout of inflation?
Is the recession threat real? How will it change the current inflation dynamics? How will the central banks respond? A simple answer to these questions is ‘nobody knows’
BUSINESS
Much of the increase in RBI’s policy rate is already priced in by bond markets
Markets are forward looking -- in all the previous rate hiking cycles, the maximum rise in yields had happened until the first rate hike
