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RBI Draws Near, Bonds Tread Water As Equities Gain


Bonds held steady yesterday, entering a holding period ahead of the RBI's rate announcement on Friday. The RBI is expected to maintain policy settings and acknowledge headwinds to growth, while expressing a preference to wait for more data points on the inflation. The RBI has maintained that higher inflation is transitory but inflation prints remain stubbornly higher.

  • Kotak Asset Management noted that Friday could see "some steps towards normalization of liquidity via increased tenor or quantum of VRRR (variable rate reverse repo) – something which bond markets seem to be anticipating". Equity markets seem to be anticipating a dovish outlook from the RBI, indexes closed at record highs yesterday.
  • Elsewhere India's total debt jumped to 60.5% of GDP in the last fiscal year up from 51.6% previously. External debt accounted for 3.5% of GDP.
  • Markets await services PMI figures later in the session, as well as a sovereign bill auction for total INR 170bn.

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