Yield curve has steepened significantly over a year.

Insight:  The yield curve of India has steepened signficantly over the last one year with (10y-3m) yield differential rising from 190 bp to 286 points. The lower end yields have reduced signficantly by the liquidity, on the longer end (10-year), RBI is trying to anchor this rate at around 6%. In its latest monthly bulletin, and chapter titled the State of the Economy, the central bank remarked that the economic revival, which is gradually being built with the help of regulatory forbearance, is being threatened by the bond market. The central bank said that it can increase bond purchases if the yields keep rising.

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