“The MPC’s unanimous pause is a reflection of the economic uncertainties surrounding policy making today. However, as emphasized by the RBI Governor, this pause may not be interpreted as the end of battle against inflation. Bond market narrative will now shift focus on how long will the MPC need to persist with existing tightness in monetary policy. In absence of a major global event, we expect an extended pause in domestic repo rate. This is because, while the inflation is likely to soften in FY24, we are far from MPC’s eventual target of 4% headline CPI. Overall, we expect domestic yields to remain range bound till clarity over future direction of policy rates emerges. Additionally, ongoing steepening trend in the sovereign yield curve will be reinforced as a result of this policy. We expect 10-year GSec to trade in the 7.10%-7.40% range in the near term.”