DBS Group Research strategist Sherilyn Chew contrasts India’s domestic backdrop with Indonesia, arguing India is deeper into a tightening phase. Markets are pricing a possible Reserve Bank of India (RBI) hike in October, with liquidity surplus falling after RBI draining measures. She notes wider 5-year IGB-OIS spreads post-FCNR(B) closure and compressed 2s10s, seeing scope for India rates spreads to narrow further as global policy stays hawkish.

India curve and tightening expectations

“India, by contrast, is moving deeper into a domestic tightening phase.”

“With markets increasingly positioning for RBI tightening and the global policy backdrop remaining skewed towards further rate hikes, there remains scope for India rates spreads to narrow further.”