FxWirePro: Indian monetary policy revivals signal IGBs lucrative investment avenue

An outlook on Indian: RBI governor upbeats streets expectation by both surprising policy rates cuts more than forecasted, announcing no imposition of MAT that could have an adverse impact on FIIs and foreign companies and rising foreign investment limits, all of which we reckon will be very supportive for Indian government bonds and the INR. However, sentiment for Indian assets could improve further depending on the outcome of upcoming regional elections in Bihar as we outline this regional election will have important ramifications for the ruling BJP's legislative agenda and Indian asset prices.

Dovish RBI and easing of FPI limits positive for rates: We believe the higher FPI limits will support IGBs (ie, potential increased foreign inflows from October). In addition, ongoing disinflation, the positive real rates-led rise in household financial savings, and fiscal consolidation are all supportive of a secular bull market in bonds.

Following the surprise easing in monetary policy in Taiwan last week and India's bigger-than-expected rate cut, there are growing risk of a policy move in Singapore at the next MAS meeting in mid October.

We recommend adding longs on 15Y IGB, receive 5Y OIS The RBI cut the benchmark rate 50 bps this week, larger than market expectations of 25 bps. Moreover, the RBI released a medium-term framework to open India's bond markets to foreign investors. And in addition we also recommend 1M USD call SGD put RKO option and recommend entering a 5Y matched maturity ASW.