Oil, CPI Expectations & Recovery In Core Global FI Help Bonds To Richen

INR government bonds were 1.0-2.5bp richer at the close, with the belly outperforming and the longer end lagging.

• Expectations surrounding a slowdown in the May CPI release, which provided a slightly more pronounced downtick than expected (+4.25% Y/Y vs. BBG median +4.31% and prior +4.70%), will have aided the bid. Note that the outcome was well within the band of economist projections provided in the latest BBG survey.
• This dynamic should allow the RBI to maintain its current stance (“pause not a pivot”) in the immediate term, with a more meaningful slowdown in inflation probably required before the Bank turns to an easing bias (see Governor Das’ references to inflation dynamics after last week’s policy decision for more on that front).
• Elsewhere, the weakness in crude oil futures would have also aided the bid, as would a recovery from session cheaps in core global FI markets.
• We also re-highlight a RTRS source piece that was run earlier today, noting that “the Indian finance ministry officials will meet credit rating agency Moody's Investors Service on June 16 and pitch for a sovereign rating upgrade.” Moody’s currently rates India at Baa3 (the lowest investment grade level), with a stable outlook.