India / Interest Rate

India rates: Union Budget and Fading Risks

Duncan Tan, Eugene Leow / January 27, 2021
Compared to much of 2020, the various risks around inflation, COVID-19 containment, economic recovery and fiscal/debt dynamics have been fading.
Key summary points
  • FY22 Union Budget expected to show reductions in deficits and borrowings
  • Sends a signal to embark on fiscal consolidation and ensure longer-term debt sustainability
  • Various risks are fading and broader picture around GSecs has improved
  • Sizable GSec rally is unlikely because RBI policy to center around gradual and phased tightening
  • Implication for investors: We like GSec curve flatteners and receive 1Y1Y OIS/NDOIS

India rates: Union Budget and Fading Risks

Photo credit: AFP Photo

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