India OIS curve may steepen on overcooked rate hike bets: BofA Securities

A part of India's overnight indexed swaps curve, a gauge for future policy rates, may steepen as investors are pricing in a more hawkish-than-expected central bank stance, BofA Securities said on Friday.

BofA expects the Reserve Bank of India to raise rates by 25-35 basis on Sept. 30 and reckons the policy rate will reach 6.5% by end-2023, much later than what some investors are expecting.

The forward OIS curve up to 6 months is pricing in two 60-basis-point rate hikes over the next two RBI meetings, which would take the policy rate above 6.5% by December itself.

"Inflation and growth indicators (are)