INDIA: Country Wrap: RBI Policies Boosting FX Reserves

JGB futures are weaker and near session cheaps, -21 compared to settlement levels.

• “The BOJ is likely to raise the policy rate by 25 bps once more this year, PGIM Fixed Income says in a note. However, the central bank could accelerate rate hikes in the event Japanese consumers materially step up consumption, it says.” (per WSJ via BBG)
• “"We cannot understand the impact [of Trump's measures] on Japan unless we see the whole picture--such as how the overall package, instead of individual policies, would look like and what kinds of policy developments are causing currency fluctuations," Ueda told a parliamentary committee.” (per DJ via BBG)
• Cash US tsys are 1-2bps cheaper in today’s Asia-Pac session after yesterday’s modest sell-off. The focus is on key US CPI inflation data today at 0830ET.
• Cash JGBs are flat to 3bps cheaper across benchmarks, with the 10-year underperforming. The benchmark 10-year yield is 3.0bps higher at 1.347%, a fresh cycle high.
• The swaps cure has twist-steepened, with rates 1bp lower to 2bps higher. Swap spreads are mostly tighter.
• Tomorrow, the local calendar will see PPI data alongside BOJ Rinban Operations covering 1-3-year and 5-25-year+ JGBs.

Asian markets mostly rose, with Hong Kong leading gains as enthusiasm for AI developments, particularly DeepSeek and Alibaba’s reported collaboration with Apple, drove sentiment. The Hang Seng jumped 1.6%, while China’s CSI 300 edged down 0.1%, reflecting mixed sentiment amid ongoing Fed rate concerns. Japan’s Nikkei 225 rose 0.2%, but broader Japanese shares underperformed as the yen weakened for a third straight day on concerns over Trump’s tariff policies.

• South Korea’s Kospi gained 0.3%, supported by defense and shipbuilding stocks, Taiwan's TAIEX is 0.15% lower, while Australia’s ASX 200 added 0.3%. Indonesia’s JCI rebounded 0.9% from recent lows, while India’s Nifty 50 slipped 0.3% ahead of key inflation data.
• We saw some weakness across risk assets earlier following Trump speaking at the White house, he emphasized his desire to end the war in Ukraine and expressing appreciation for Russia’s release of hostage Marc Fogel. He declined to confirm if he spoke with Putin but hinted that another release is expected tomorrow. Trump also suggested there is "goodwill" regarding the war and, when asked about reciprocal tariffs on Wednesday, responded, "We'll see."
• Investors remain cautious ahead of US inflation data, with Fed Chair Powell reinforcing a “no rush” stance on rate cuts. Treasury yields edged higher, and money markets fully price in just one Fed rate cut in 2025. The yen continued to decline, while oil and gold traded lower.

Increasing tariffs on trading partners was a key election policy of Republican Trump and he has followed through since his inauguration on January 20. However, trade interventions have been part of the global landscape for some time with protective and harmful measures far exceeding liberalising ones for the last 15 years.

• According to data from Global Trade Alert, harmful trade interventions peaked in 2022 and have been trending lower since then. Most governments choose to use subsidies ex exports accounting for 54.3% of the total between 2009-2025 and only 8.6% were tariffs. This trend is unchanged in more recent years, except this year where tariffs to date have accounted for 23.4%.

Global new trade interventions/year

• 2024 looks like it may have the least number of harmful measures since data began in 2009, but this early in 2025, data may still be coming in to Global Trade Alert. But for the 1536 harmful interventions recorded, there were only 704 liberalising ones.
• In 2025 to date, there have been 280 interventions with 192 harmful and 88 liberalising. Unsurprising the US has introduced the most number of harmful measures but India and Brazil are not far behind. There has been a partial offset from India with some liberalising interventions.
• This year China then the US and Russia have been most exposed to harmful trade measures, while Ukraine is the biggest beneficiary of liberalising ones.
• Over 2009-2025, Germany, France and Italy have been most exposed to harmful interventions and China, US and Germany to liberalising ones. US, China and Brazil have contributed the most to harmful ones, while Australia, Brazil and India to the liberalising measures, according to Global Trade Alert.
• In terms of sectors, iron/steel products have been hit the hardest over 2009-2025 followed by autos and other fabricated metal products. The US will impose 25% tariffs on steel and aluminium imports from March and autos are currently being considered.

Global harmful trade policy instruments used % total 2024-2025

Source: MNI - Market News/Global Trade Alert