June 2025 Debt & Forex Report: Crude Surge, Rate Cut Boost

India’s debt and forex markets navigated a dynamic June 2025, marked by a surprise 50 bps repo rate cut, easing inflation, and rising crude oil prices driven by geopolitical tensions.

Key Highlights:

Global Developments

• Crude oil prices rose to ~USD 79/bbl in Jun amidst Middle East tensions — highest since Jan 2025 — but have eased 14% since tensions subsided.
• Nonetheless, the Middle East conflict remains a key monitorable, especially as the Strait of Hormuz handles over a quarter of global seaborne oil trade.
• We expect Brent to average between USD 65–70 per barrel in FY26, assuming no further escalation in tensions.
• ECB cut rates in Jun; Fed, BoE, and BoJ kept rates unchanged.

India Debt & FX Market Trends

• Repo rate cut by larger-than-expected 50 bps in Jun. CRR slashed by 100 bps.
• We expect the status quo on policy rates unless growth risks materialise.
• CPI inflation eased to 2.8% in May, marking the lowest reading since Feb-19.
• Monsoon has picked up pace, with cumulative rainfall now in surplus territory.
• Average banking system liquidity surplus stood at Rs 2.8 lakh crore so far in Jun.
• RBI reintroduces VRRR auctions amidst surplus liquidity.
• India 10Y GSec yield rose by ~7 bps over past month.
• The yield curve steepened with falling short-end yields.
• Bank credit & deposit growth slow.
• Repo rate cuts are yet to reflect in key rates fully.
• Corporate bond issuances in Q1 FY26 (up to May) amounted to Rs 2.3 lakh crore, up 68% YoY.
• Net FPI outflows of USD 2.5 billion recorded so far in Jun, reversing May inflows.
• On a CYTD basis, the dollar is down 9.6% and CNY up 1.7%, while the INR has weakened marginally by 0.5%.

Read full report: Debt_Forex_Market_Update_-_June_2025