Global developments

US long-term yields have retreated about 4-6bps, resulting in the yield curve flattening. The rally in crude prices seems to be taking a breather. Natural gas prices too have cooled off and this has brought some relief to bond markets. The US Dollar has weakened overnight. The Euro has bounced off the lowest levels seen yesterday since July'2020. The Pound continues to trade a 1.3550-1.3650 range.

US job openings fell for the first time since last year. Today the focus will be on the US CPI print (exp 0.3% MoM and 5.3% YoY) and minutes of the latest Fed meeting.

Domestic developments

September CPI print came in lower than expected at 4.35% against the expected 4.50% mainly on lower food prices. Core inflation however stays elevated at 5.99%. August IIP print came in better than expected at 11.9%. The IMF lowered the global growth forecast a tad bit kept India's FY22 growth forecast unchanged at 9.5%

Equities

The Nifty ended 0.25% higher yesterday at 17991. Asian equities are trading with a positive bias despite a weak close on Wall Street.

Bonds

The pressure on bonds and Rates eased yesterday. The yield on the benchmark 10y retreated 2bps to 6.33%. 3y and 5y OIS too cooled off about 5bps to end at 4.96% and 5.51% respectively. Lower than expected CPI print, a drop in US treasury yields and a halt in crude price rally may further boost sentiment in the bond market today.

USD/INR

We saw exaggerated two-way price action in USD/INR yesterday. The Rupee had recovered to 75.17 initially but sold off thereafter to 75.67. Likely intervention by the central bank helped the Rupee close at 75.51. Asian currencies are stronger against the USD.  3m Atmf vols ended at 5.01% while 1y forward yield ended at 4.43% yesterday.

Strategy: Exporters are advised to cover at the current level. Importers are advised to cover on dips towards 74.50 The 3M range for USDINR is 73.80 – 76.00 and the 6M range is 73.50 – 76.50.

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