Interest rates

RateView : CRISIL's outlook on near-term rates

May 2023

Atypical April

The yield on the 10-year benchmark government security (G-sec; 7.26% GS 2032) opened April at 7.32% and closed at 7.15%, down 16 basis points (bps) from its March close of 7.31% and outside CRISIL’s forecast range of 7.25-7.40%.

The first week began on a negative note due to a sharp spike in crude oil prices after OPEC+ decided to cut daily output by ~1.15 million barrels per day. However, as the week progressed, yields softened as the Monetary Policy Committee (MPC) kept its repo rate unchanged at 6.50%, leading the domestic benchmark to close on a positive note, at 7.22%.

The second week opened on a negative note following a surge in US Treasury yields (3.30% to 3.41%). However, as the week progressed, bond yields fell on account of a lower-than-expected domestic Consumer Price Index (CPI)-based inflation print for March 2023 of 5.66%. On the global front, the US CPI-linked inflation eased to 5.00% in March, compared with 6.00% a month ago. The 10-year benchmark closed the week at 7.23%, up 1 bp from the previous week.

The third week started on a bearish note, tracking a surge in US Treasury yields. However, as the week progressed, bond yields softened due to a decline in overnight index swap rates and global crude oil prices. In addition, the minutes of the MPC meeting were in line with market expectations, which supported yields.

The last week of the month started on a positive note as market participants expected the MPC to continue with its pause in raising interest rates for the June policy. Bonds largely traded in a narrow price range ahead of the Federal Open Market Committee (FOMC) outcome. The 10-year benchmark G-sec closed the week at 7.15% compared with 7.18% a week ago.

Download the report