India benchmark 10-year G-Sec yield averaged at 6.87% in Aug (lower than the July average of 6.97%) on positive sentiments in fixed income markets globally.

Improvement in liquidity conditions resulted in a decline in money market yields across the board. Favourable demand-supply conditions continues to contribute towards softer government bond yields.

Domestic inflation is likely to moderate on the back of a good monsoon helping cool-off the perishable components of the food basket while the core inflation will broadly remain in control. Going ahead, markets will keenly watch out for dynamics related to global growth and for any communication from MPC members with respect to the stance on liquidity and rates.