INTEREST RATE STRATEGY: Steep curve appeals

• Rate hikes in India no longer mean higher yields on longer-term Gilts

• The future path for short rates implied by the yield curve is steepen enough; it already implies a return of policy rates to pre-crisis levels

• Further rate hikes will mainly bring a flattening of INR yield curves; upward pressure on longer-term interest rates will be minor

• India is one of the few local-currency government bond markets where positive total returns in 3Q10 are expected

• We recommend investors buy IGB 7.02 08/17/16 at a yield above 7.6%. The expected 90-day total return is between 1.80-2.8%

To read the full report: INTEREST RATE STRATEGY