Highlights:
Global
- US yields rose after robust Q2 GDP data fueled bets of more Fed rate hikes.
- European bond yields seen higher with another September rate hike on the cards.
- Upside in UK gilt yields could remain capped if ongoing economic slack worsens.
- BOJ’s YCC policy adjustment likely in the last quarter of 2023.
Domestic
- 10-year bond yield rose to 7.17% as inflation concerns resurfaced.
- Banking system liquidity remained in surplus on healthy government spending.
- RBI could continue with VRRR auctions to keep system liquidity near neutral.
- Net FPI inflows rose for the fifth straight month to USD 5.6 billion in July.
- We expect RBI to maintain an extended pause in 2023 owing to upside risks to inflation.
- 10-year benchmark bond yield seen around 7-7.2% by end-FY24.
- Rupee is expected to remain in 81-83 range by end-FY24.
