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Markets price a potential RBI hike in October as liquidity tightens

DBS Group Research says liquidity has been drained after RBI measures, and wider 5-year IGB-OIS spreads followed the FCNR(B) closure could eventually narrow further.

Reported · Written up by our desk · Central Banks

DBS Group Research strategist Sherilyn Chew said India is deeper into a tightening phase than Indonesia, contrasting the two countries’ domestic backdrops, according to FXStreet.

FXStreet reports that markets are pricing a possible Reserve Bank of India hike in October, with liquidity surplus declining after the RBI implemented draining measures.

Chew also cited changes in Indian rates, noting wider 5-year IGB-OIS spreads after the FCNR(B) closure and compressed 2s10s, and she sees further scope for India rates spreads to narrow if global policy remains hawkish.

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