Key Points
On Wednesday, the Indian debt market saw a slight inversion in the yield curve for the first time in around eight years on the back of worsening liquidity deficit in the country's banking system and bets of continued rate hikes..
It all started with yields rising all over the world and in India after US Federal Reserve Chair Jerome Powell said in his testimony to Congress that given the strong economic data, rates may have to remain higher for longer, and even be raised at a faster clip..
The Reserve Bank of India sold 364-day notes at a 7.48% yield, the highest since October 2018, while the 10-year benchmark 7.26% 2032 bond yield saw a high of 7.4728%, and ended at 7.4547%, according to a Reuters report..
But this correlation between yield curve inversion and recession is found only in developed countries, not developing countries like India," said Dr VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services..
The 364-day T-Bill yield has jumped 58 basis points in the last six weeks amid uncertainty over interest rate hikes, while banking system liquidity moved into deficit which is expected to widen in the coming weeks..
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