Yield on the 10-year benchmark government bond could move up 4 basis points (bps) in the three-month period, while the change for corporate and state bonds could be as much as 11 bps, it said.
The 10-year benchmark bond had settled at 7.11% at end-June, gaining 12 basis points during the month. In July, it is expected to oscillate between 7.05% and 7.15%, according to the Crisil outlook.
State development bonds hardened by 5 bps to 7.39% and corporate bonds (10-year public sector financial institutions) by 12 bps to 7.49% in June. Housing Development Finance Corporation, now merged with HDFC Bank, saw yields increase 5 basis points to 7.76% in June. Yields on 10-year bonds of AAA-rated non-banking finance companies and state-run companies ended at 7.70% and 7.49%, respectively, in June.
In the September quarter, yields are likely to be impacted by crude oil price movements, inflation, fiscal numbers, rate decisions by the Indian and US central banks, India’s economic growth trend and foreign portfolio flows, Crisil said in its outlook on bond yields.
Consumer price inflation is expected to reduce to 5% and India’s GDP growth is projected to slow to 6% in fiscal 2024. The RBI, meanwhile, is expected to maintain status quo on rates in the next few meetings.
Crisil expects crude oil prices to average $75-80 a barrel this fiscal year, compared with $95 last year.The ratings firm noted that FPI inflows into debt increased to Rs 9,178 crore in June from Rs 3,276 crore the previous month, aided by a stronger rupee.
India’s current account deficit is declining, and if this trend continues, the rupee may appreciate further, said Crisil, adding: “FPIs are likely to bring more inflows into India in such a scenario.”
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