May 25, 2015
Money Markets:
  • The week ending on 22nd May 15, witnessed average daily net liquidity shortfall under LAF at Rs. 16,121 cr. as compared to previous week’s average shortfall of Rs. 13,883 cr. The average MSF borrowing stood at Rs. 306 cr. Total overnight liquidity shortfall as at week-end stood at Rs. 14,426 cr.
  • Average weekly Call Rates surged to close at 7.57% against 7.41% of previous week-end; during the same period CBLO Rates rose to 7.61% against 7.51% of previous week.
  • During the week, RBI absorbed liquidity worth Rs. 72,460 cr. through 7-Day, 14-Day and Overnight Variable Repo auctions.
G-Sec Market:

  • RBI conducted weekly auction for securities 7.68% GS 2023, 7.72% GS 2025, 8.24% GS 2033 and 8.17% GS 2044 for a total notified amount of Rs.16,000 cr. The cut-offs for the securities came in at 7.83%, 7.72%, 7.99% and 7.99% respectively. All the four securities were fully subscribed. The bid-cover ratio was at 3.41 against 2.38 of previous week.
  • Old benchmark 10-yr security 8.40% GS 2024 closed lower at 7.85% against 7.88% of previous week. Aggressive pricing of new 10-yr benchmark security kept the market supported. New benchmark 10-yr security 7.72% GS 2025 with cutoff set at 7.72% stood inline with market expectations, while later closed at 7.69% for the week.
  • 5-yr OIS eased for second consecutive week to 7.10% from previous week levels of 7.20%; while the 1-yr OIS closed at 7.48%; lower by 5 bps from previous week levels. The 1–5 yr spread declined to -5 bps from 7 bps of previous week.
Corporate Bonds

  •  LIC Housing Finance issued bonds of Rs. 2.5 billion at 8.73% for tenor of 3 Years with green shoe option.
  •  Power Grid Corp. has issued bonds of Rs. 20 billion for tenor of 15 Years with green shoe option.
  •  Exim Bank issued bonds of USD 500 mn due in 2020 with a coupon of 2.5%.


Macro Indicators

  • The IMD has released its first forecast for the monsoon stating that it is likely to be below normal (90-96%) with a 33% chance that monsoon will be deficient i.e. below 90%.
  • For overseas lenders in rupees RBI stated that the offshore lenders would enter into a swap transaction with their overseas bank that in turn will enter into a back to back transaction with a bank in India. The continuation of the swap will be subject to the existence of the underlying ECB at all times.
  • RBI has also eased norms for FDI investments by NRI’s, OCI’s and PIO’s.
  • April-15 CPI stood at 4.87% against 5.25% of March and WPI for the same period declined to -2.65% against -2.33% of March.
Global Markets

  • Fed Chair, Janet Yellen stated that it is appropriate at some point this year to start hiking interest rate from the current near zero level if the economy improves as expected while continuing focus on improvement in labor market along with inflation target of 2% over the medium term.
  • US CPI surged to 0.1%, in April from 0.2% in March. Core CPI rose to a seasonally adjusted 0.3%, from 0.2% in the preceding month.
  • Euro Trade Balance marked at 19.7 billion against 22.6 billion earlier. Exports of goods to the rest of the world in March 2015 was euro 182.4 billion against euro 164.4 billion in March 2014. Imports from the rest of the world stood at euro 159.1 billion.
  • Concerns continue to haunt Greece as Greek’s Interior minister, Nikos Voutsis stated that Athens simply cannot satisfy IMF deadline next month unless it is able to work out a deal with eurozone creditors.
  • Five major banks agreed to pay penalties over USD 5 bn to US and British regulators in settlement of criminal charges relating to rigging of foreign exchange rates.
  • Britain slipped in to recession with CPI falling by 0.1% y-o-y while Mark Carney, Governor of Bank of England, stressed that the decline was caused by last year's big one-off fall in energy prices, and not by weak domestic demand.
  • Japan Q1 GDP marked 0.6% against 0.4% earlier as economy expanded at its fastest pace in a year in January-March but growth was inflated by a rise in inventory levels due to weak demand.
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