Key Highlights:
Global
- US yields rose sharply higher tracking strong jobs data, hawkish FOMC meeting.
- Fed rate cut probabilities shifted to H2-2024.
- ECB, BOE expected to keep policy rates on hold as growth outlook turns bleak.
- JGB bond yields test 1% after BOJ’s hawkish policy meeting.
Domestic
- 10-year bond yield rose as high as 7.34% following RBI hints of OMO sale.
- Tightening banking system liquidity led to mild inversion between 2–10-year bond yield.
- Average banking system liquidity stood at a deficit of over Rs 13,000 crore in September.
- Chances of RBI rate cuts have been postponed to second half of the next fiscal year.
- CD issuances pick pace on healthy credit demand, tightening liquidity.
- Rupee fell to fresh lows amidst a strong dollar, waning FPI flows and rising crude oil prices.
- We expect the 10-year benchmark bond yield to trade within 7-7.2% by end-FY24.
