NEW DELHI: What lies ahead for fixed income investors in 2024? There’s a sense of certainty that Central banks globally, especially the US Fed, has softened its tone and is likely getting ready for a rate cut in the Calendar Year. While back home, the RBI continues to be vigilant on inflation risk but falling core inflation has already lowered the inflation risk premium on bond yields.
Pankaj Pathak, fund manager, fixed income, Quantum AMC, says, “Falling core inflation should lower the inflation risk premium on bonds by reducing the yield spread on government bonds over the policy repo rate. This in turn can bring down the bond yields even without a rate cut by the RBI. Any increase in the rate cut probabilities would further intensify the downward trend in bond yields.” This could have a downward impact on bank FD rates as well.
However, since RBI has made it clear that it is not lowering its guard in the fight against inflation, it is likely that FD rates may remain at the current levels before seeing a marginal drop.
According to Manish Kothari, president and head, Commercial Banking, Kotak Mahindra Bank Ltd, bank deposit rates may remain at present levels for some time to come before heading lower, that too maybe marginally.
It must be noted that the weighted average domestic term deposit rate (WADTDR) on fresh rupee term deposits of SCBs moved to 6.34% in November 2023 from 6.31% in October 2023. For outstanding rupee term deposits, it stood at 6.78% in November 2023 as against 6.75% in October 2023.