In this note, we assess the recent rally in Indian Government Bonds driven by recent RBI measures which have coincided with, easing geopolitical tensions, lower crude oil prices, and improving global risk sentiment. While these developments have strengthened the outlook for fixed income markets, we believe most of the positive factors, including the potential Bloomberg Global Aggregate Index inclusion are now largely priced in. We also highlight the risk from a potentially weak monsoon due to El Niño, which could pose upside risks to inflation and limit further gains. Further 10Y USTs continue to be sticky, trading around 4.50 levels driven by Fed Chairman’s comments. We believe that Indian markets have been largely ignoring that for now.
