India’s 10-year government bond yield may climb to 7.5% this month as traders bet on faster interest-rate hikes following the Reserve Bank of India’s (RBI) aggressive rupee defense. The central bank has deployed measures including a special foreign-currency window for oil refiners, but persistent oil prices above $100/barrel and foreign outflows are forcing markets to price in a 50-basis-point December hike. Governor Sanjay Malhotra signaled further action is possible, reinforcing expectations the policy rate could reach 6.5%.
Analysts warn tighter liquidity from dollar sales may pressure bonds more than rate hikes. The rupee has gained 1.6% this week to around 95 per dollar, but analysts caution the rally may be short-lived amid global headwinds.
Source: Bloomberg Markets · Summarized by HeadlinesBriefing