INSUBCONTINENT EXCLUSIVE:
By Subhadip SircarThe interest-rate cycle in India is turning
The central bank may be set to tighten policy next week to keep inflation in check and stem the declines in the rupee, if the rate-market
raising expectations that borrowing costs would remain on hold
But a surprising hawkish tilt revealed in its April policy minutes and the recent spike in oil has boosted speculation the authority may
income at IDFC Asset Management Co
strategist at Nomura Holdings Inc
The gap increased as much as 326 basis points in March 2010, before the RBI started raising borrowing costs
It widened to as much as 199 basis points a month before the authority began to tighten in September 2013.
Short-tenor bonds have
underperformed recently, causing the yield curve to flatten
expects the RBI to tighten by 25 basis points each, in June and August
Kulkarni, Asia rates strategist at Standard Chartered Bank in Singapore
The curve will steepen if the central bank sounds hawkish, and the market starts preparing for two to three increases, while a dovish hike
may cause it to flatten, he said.
The spread between the price of one-year forward contracts, in which rates to be exchanged are agreed on
12 months prior, and the price of immediate swap payments has surged to the highest since 2011
That typically signals higher rates going ahead.
Offshore swap markets are pricing in the most rate hikes in India among Asia countries over
The country raised borrowing costs earlier this month, the first since 2014
said in a note Wednesday.
