DBS Group Research strategist Sherilyn Chew has highlighted that India is advancing further into a domestic tightening phase compared to Indonesia, with markets increasingly positioning for a possible Reserve Bank of India (RBI) rate hike in October [1]. This expectation comes as the liquidity surplus in India has been declining following RBI's liquidity draining measures [1]. Chew points out that the 5-year India Government Bond-Overnight Index Swap (IGB-OIS) spreads have widened after the closure of the FCNR(B) scheme, while the 2s10s curve has compressed [1].
She sees scope for India rates spreads to narrow further, especially as the global policy environment remains hawkish and tilted towards additional rate hikes [1]. According to Chew, the combination of domestic tightening and global policy trends supports the view that India’s rate spreads could continue to contract [1].
No specific market reactions or analyst forecasts beyond these observations are provided in the article [1].
CONCLUSION
DBS strategist Sherilyn Chew expects India’s rate spreads to narrow further as the country moves deeper into a tightening phase and markets anticipate a potential RBI rate hike in October. The ongoing global hawkish policy stance reinforces this outlook, though no immediate market reactions are detailed.