Financial markets are signalling liquidity tightening and a slowdown in the economy, as shown by a sharp rise in yields on short-term bonds, resulting in the spread between those and the rates on long-term bonds narrowing.
The spread between the yield on the 10-year government of India and two-year bonds declined to a 38-month low of 36 basis points on Tuesday compared to 83 basis points at the close of last month and 200 basis points at the end of December last year.
The spread was 209 basis points at the end of August last year.
According to the data