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Indian 10 Year GSEC yields

7 Apr 2021 ‚óŹ 05:55 AM

As we head into the RBI meeting it is important to look a the 10-year GSEC bond yield. Bond prices have started to rise as the 10-year GSEC yield declined on the chart below. Note wave 2 is only 23.6% of wave 1. This is a very small bounce in interest rates but that is in line with a scenario where bonds are in a strong bull market and interest rates are due for a meaningful decline. 

Here is a longer-term chart with an unusual and most unexpected view. Bond yields will go back to 4.35% in the coming 2 years. What will drive that move is what I will leave you to guess. One reason is that the whole world is in the mode of Government spending and that cannot go on for long unless interest rates are calibrated downwards by central banks. So this has to happen somehow despite the fear of inflation. Maybe the USDINR is sensing something today. The currency breaking out may be front running an interest rate cut. Let's see.

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