Feb 01, 2016
Money Markets:
  • The truncated week ending on 29th January 16, witnessed an average overnight net liquidity deficit under LAF at Rs.12,719 cr as compared to previous week’s average liquidity deficit of Rs.13,041 cr. The daily average MSF borrowing stood at Rs.640 cr.
  • Money market rates remained elevated during the week; with call rates ending at 7.05% as against 6.95% in the previous week. The CBLO rates ended at 7.00%, from previous week’s 6.80%.
  • During the week, RBI injected total Rs.69,360 cr through term repos, whereas the RBI did not conduct any term reverse repo during the week.
G-Sec Market:

  • RBI conducted weekly auction for securities 7.35% GS 2024, 7.59% GS 2029, 8.24% GS 2033 and 8.13% GS 2045 for a total notified amount of Rs.14,000 cr. The cut-offs for the securities came in at 7.80%, 7.90%, 8.24% and 8.25% respectively. The security 8.13% GS 2045 was devolved on Primary dealers to the extent of Rs.616.75 cr. The bid-cover ratio stood at 2.51 as compared to 2.59 in the previous auction.
  • The old benchmark 10-yr security 7.72% GS 2025 closed at 7.78%, no change w-o-w. The new benchmark 7.59% GS 2026 closed at 7.64% unchanged w-o-w. The Gilts market opened weaker tracking a surge in the global crude prices. The G-sec witnessed a sell-off and the benchmark yields hardened by around 3-5 bps. The market witnessed range bound trading as it opened after the mid-week holiday. The G-sec posted some gains ahead of the US FOMC announcement. However markets slipped post the FOMC announcement as the crude prices continued to surge and the pressure on the rupee mounted. The G-sec recovered towards the end of the week on positive global cues post BOJ policy and favorable auction cut-offs, to end the week flat.
  • The OIS witnessed some receiving across tenors. The 5-yr OIS closed at 6.72%, 5 bps lower from previous week levels; while the 1-yr OIS closed at 6.87%; 4 bps lower from previous week levels. The 1 – 5 yr spread narrowed by 1 bp to end at -15 bps levels.
  • The 5-yr OIS swap rate traded at 5-yr low levels of 6.70% on the back of improving interest rate sentiment helped by the recent announcement of OMO purchases and the positive impact of the fall in global crude prices.
  • RBI rejected all the bids for the weekly 91-day t-bill auction for which it had notified an amount of Rs.9,000 cr. This was the second t-bill auction during the month which was cancelled by the RBI due to high interest rate bid by the participants. The other 182-day t-bill auction went off smoothly.
Corporate Bonds

  • The corporate bond market witnessed sell-off during the week. The 10-yr AAA bond traded at a yield of 8.42%, 7 bps higher from previous week levels of 8.35%. The yield on 1-yr AAA bond ended at 8.05%, 5 bps higher from previous week levels of 8.00%.
  • The major corporate debt issuances during the week were: SIDBI issued 8.05% 3-yr bonds (Mar 2017 Put/ Call option) to raise Rs.200 cr. Power Finance Corp issued 8.12% 3-yr bond to raise Rs.700 cr.
  • RBI auctioned 10-yr/15-yr SDL papers on behalf of sixteen State Governments. Against a total notified amount of Rs.17,600 cr, RBI received bids worth Rs.30,383 cr, of which RBI accepted bids worth Rs.18,000 cr, including an additional retention of Rs.400 cr on UP SDL paper.
  • FPI investors bid for Rs.7,093 cr against offered G-sec limit by the RBI worth Rs.3,476 cr. The auction was carried out on the NSE’s e-bid platform.
  • RBI received subscription worth Rs.726 cr under the second tranche of the gold bond scheme. The total quantity of gold subscribed stood at 2,790 kg.
Macro Indicators

  • India’s fiscal deficit for Apr- Dec 2015 period stood at Rs.4.88 lakh cr which was at 87.9% of the full year budgeted estimates. This compares with 100.2% for the same period last year.
  • RBI revised the WMA (Ways and Means Advance) limit for State Governments for 2015-16 to Rs.32,225 cr from Rs.15,360 cr.
  • Government sold a 10% stake in Engineers India Ltd (EIL) to raise around Rs.637 cr. The disinvestment took place through OFS route.
  • Monthly WPI inflation stood at -1.73% in December 2015 whereas the CPI inflation stood at 5.61%.

Global Markets.

  • FOMC left the fed funds rate unchanged at 0.25% - 0.50% range. The Federal Reserve sounded a dovish tone as it mentioned that it is monitoring the global developments. Fed reiterated that the current economic situation warrants only a gradual rise in rates. The Fed expects the labour market to improve but sounded a little cautious on inflation.
  • US Consumer Confidence index rose to 98.1 in Jan 2016 from 96.3 in Dec 2015.
  • US Markit flash PMI dropped to 53.7 in Jan 2016 from 54.3 in the previous month, registering its weakest reading since Dec 2014
  • US Philadelphia Non-Manufacturing index dropped to 21.4 in Jan 2016 from 24.8 in the previous month.
  • US durable goods orders dropped 5.10% in Dec 2015, following a 0.50% decline in Nov 2015.
  • Bank of Japan cut the rate payable to banks on excess reserves to -0.10%, however the rate on most existing reserves continues to be 0.10%.
  • Japan’s Industrial output declined 1.40% in Dec 2015, while the core CPI rose 0.10%.
  • China’s official manufacturing PMI dropped to 49.4 in Jan 2016 from 49.7 in the previous month. Whereas the services PMI fell to 53.5 from 54.4 in Dec 2015.
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