Aug 25, 2014
 Money Markets:
  •  The truncated week ending on 14th August 14, witnessed an average daily net borrowing under LAF at Rs.6,259 cr as compared to previous week’s average of Rs.17,595 cr. The average MSF borrowing stood at Rs.305 cr. Total overnight liquidity shortfall stood at Rs.6,564 cr. RBI injected another Rs.61,512 cr from 14-day term repo.
  •  Money market rates eased during the week; with call rates ending at 8.00% as against 8.40% in the previous week. The CBLO rates ended at 7.65%, from previous week’s 8.50%.
  •  RBI revised the Liquidity Management Framework as it maintained the 0.25% and 0.75% NDTL cap on repo and term repo respectively. Whereas RBI has maintained flexibility in deciding the notified amount for overnight variable rate repo and reverse repo. RBI has capped the MSF amount at excess SLR + 2% below SLR of the individual bank.
 G-Sec Market:
  •  RBI conducted the weekly auction for securities 8.27% GS 2020, 8.60% GS 2028, 9.20% GS 2030 and 8.30% GS 2042 for a total notified amount of Rs.12,000 cr. The cut-offs for the securities came in at 8.59%, 8.68%, 8.74% and 8.74% respectively. All the four securities were fully subscribed. The bid-cover ratio was at 2.60 as compared to 2.78 in the previous auction.
  •  The old benchmark 10-yr security 8.83% GS 2023 closed at 8.67% 4 bps lower w-o-w. The new 10-yr benchmark security 8.40% GS 2024 ended at 8.52%, unchanged. The G-sec market began on a strong note tracking the reduced supply in g-sec and T-bills. The fall in the crude prices ensured a further rally in the g-sec. Also the FIIs ramped up positions on speculations that there might be a possible upgrade for Indian sovereign debt owing to reduction in fiscal deficit and other macro developments. However the markets witnessed profit booking towards the end of the week.
  •  The OIS witnessed receiving during the week. The 5-yr OIS closed at 8.03%, 8 bps lower from previous week levels; while the 1-yr OIS closed at 8.45%; 3 bps lower from previous week levels. The 1 – 5 yr spread narrowed on a weekly basis by 5 bps to end at -42 bps levels. The OIS may see some range bound movement before the crucial GDP data.
  •  Fund house Franklin Templeton is believed to have purchased a record Rs.16,000 cr ($2.64 bn) worth of Government bonds on Thursday, 21st Aug 2014.
 Corporate Bonds
  •  The corporate bond market did not see much action during the week. The 10-yr AAA bond traded at a yield of 9.30%, 1 bp lower from its previous week levels of 9.31%. The yield on 1-yr AAA bond ended at 9.05%, 10 bps lower from its previous week levels of 9.15%.
  •  In the primary corporate bond market: L&T issued 9.20% 2-yr debt paper to raise Rs.1,000 cr. Andhra Bank issued 9.35% 7-year bonds to raise Rs.500 cr. IDFC issued 9.36% 10-yr bond to raise Rs.1000 cr.
  •  Asian Development Bank issued 6.35% 2-yr offshore rupee bonds to raise Rs.300 cr.
  •  The FII debt limit auction by BSE witness a lukewarm response as the FIIs bid worth Rs.3,640 cr against an offered limit of Rs.3,208 cr, whereas the cut-off stood at 0.0036 bps against previous limit auction cut-off of 15 bps on 21st July 2014.
  •  Exchanges have barred foreign investors from taking further positions in the Interest Rate Futures market as the FII holding in the underlying G-sec market reached 97.20% of the permitted $25 bn limit.
  •  US CFTC (Commodity & Futures Tracing Commission) has permitted CCIL to continue clearing the Rupee denominated swaps of a few US trading members, without the registration of CFTC.
 Macro Indicators
  •  India’s indirect tax collection comprising of excise, customs and service tax stood at Rs.1.54 lakh cr in Apr-Jul 2014 period registering a growth of 3.90%.
  •  RBI in its annual report stated that the risks to central forecast of 5.50% GDP growth through Mar 2015 are broadly balanced.
  •  RBI also mentioned in the annual report that the Jan 2015 CPI inflation target of 8% is within reach, however there are upside risks to the Jan 2016 target of 6%.
  •  RBI has appointed a working group on taxation practices of financial instruments.
  •  India’s CPI inflation stood at 7.96% in July 2014 as against 7.46% in June 2014.
  •  Monthly WPI inflation stood at 5.19% in July 2014, as against 5.43% in June 2014.
 Global Markets.
  •  According the US Labour department the CPI inflation rose by 0.10% in July 2014 as against 0.30% rise in June 2014. The July numbers were slowest in 5 months and witnessed a partial offset in rising food prices due to a slump in energy prices.
  •  Fed Chairperson Janet Yellen in the Jackson Hole address stated that although the labour market improvements are encouraging it is still unclear whether the labour market has recovered fully post the damage done by the economic crisis over the last 5 years. Yellen added that the inflation has failed to reach the Fed target of 2%.
  •  ECB President Draghi while speaking at the Jackson Hole stated that the ECB is ready to expand monetary stimulus and maintain low rates in order to boost inflation.
  •  The MarkIt flash, preliminary Manufacturing PMI for the US came in at 58 in Aug 2014 as against 55.80 in July 2014. The Aug 2014 number was the highest since Apr 2010.
  •  Euro Zone current account surplus narrowed to EUR 13.1 bn in June 2014 from EUR 19.8 bn in May 2014, reaching the lowest level in 20 months.
  •  UK CPI inflation fell to 1.60% in July 2014 from 1.90% in the previous month.

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