Sep 01, 2014
 Money Markets:
  • The truncated week ending on 28th August 14, witnessed an average daily net borrowing under LAF at Rs.4,165 cr as compared to previous week’s average of Rs.6,259 cr. The average MSF borrowing stood at Rs.328 cr. Total overnight liquidity shortfall stood at Rs.4,493 cr.
  • Money market rates surged during the week; with call rates ending at 8.45% as against 8.00% in the previous week. The CBLO rates ended at 8.15%, from previous week’s 7.65%.
 G-Sec Market:
  • RBI conducted the weekly auction for securities 8.27% GS 2020, 8.40% GS 2024, 8.32% GS 2032 and 9.23% GS 2043 for a total notified amount of Rs.12,000 cr. The cut-offs for the securities came in at 8.66%, 8.59%, 8.78% and 8.79% respectively. All the four securities were fully subscribed. The bid-cover ratio was at 3.02 as compared to 2.60 in the previous auction.
  • The new benchmark 10-yr security 8.40% GS 2024 closed at 8.56% 4 bps higher w-o-w. The G-sec market witnessed a range-bound trading during the holiday shortened week. The markets were cautious ahead of the GDP data release. The G-sec did witnesses some early pressure as Government officials ruled out any immediate hike in FII limit for G-sec. The weekly auction cut-offs were in line with the market expectations.
  • The OIS traded range-bound during the week. The 5-yr OIS closed at 8.05%, 2 bps higher from previous week levels; while the 1-yr OIS closed at 8.46%; 1 bps higher from previous week levels. The 1 – 5 yr spread widened on a weekly basis by 1 bp to end at -41 bps levels. The OIS may witness paying post the robust GDP data.

 Corporate Bonds
  •  The corporate bond market witnesses a lackluster trading during the week. The 10-yr AAA bond traded at a yield of 9.36%, 6 bps higher from its previous week levels of 9.30%. The yield on 1-yr AAA bond ended at 9.05%, unchanged from its previous week levels.
  •  In the primary corporate bond market: HDFC issued 9.43% 2-yr debt paper to raise Rs.500 cr. Dewan Housing Finance issued 9.75% 10-yr debt paper to raise Rs.500 cr. Power Finance Corp issued 9.30% 3-yr bond to raise Rs.2,160 cr, PFC also issued a 9.39% 5-yr, 10-yr and 15-yr STRPP debt papers to raise Rs.1,1740 cr. Exim Bank issued 8.95% 3-yr bond to raise Rs.750 cr.
  •  RBI auctioned 10-yr SDL papers on behalf of 10 State Governments. Against a total notified amount of Rs.7,680 cr, RBI received bids worth Rs.17,967 cr. RBI managed to sell the entire quantum without any devolvement on the PDs.
  • RBI relaxed the norms for Foreign Investors purchasing Government securities. RBI has relaxed the compulsion for Foreign Investors to purchase G-sec through an exchange registered broker. The move allows foreign investors to buy G-sec in secondary market directly through Mutual Funds, banks and Primary Dealers.
 Macro Indicators
  •  India’s GDP growth for Apr-Jun 2014 qtr stood at 5.70%, clocking the fastest pace in 2.5 years. The GDP growth for previous quarter stood at 4.70%.
  • The manufacturing, services, agriculture, construction and mining sectors registered a growth of 3.50%, 6.80%, 3.80%, 4.80% and 2.10% respectively.
  • India’s Fiscal Deficit for the Apr – July 2014 period stood at Rs.324,924 cr which was at 61.20% of the full financial year budget estimates of Rs.531,177 cr.
  • Supreme Court in a judgment has declared all the allocations of coal blocks post 1993 as illegal thus raising concerns of fuel shortage and project jeopardy.
  • RBI has simplified the ECB guidelines for AD banks allowing AD Banks to refinance existing ECB with a new ECB of higher average maturity period but subject to certain conditions.
  • EPFO has maintained deposit rate at 8.75% on Provident Fund deposits for 2014-15.
  • 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.
  • US GDP grew by 4.20% in Q2 2014, higher than previous estimates of 4.00% growth. The US GDP had registered a decline of 2.10% in the previous quarter.
  • US durable goods orders surged 22.6% in July 2014 from 2.70% jump in June 2014. The surge was mainly on account of a huge 74.2% rise in aircraft orders.
  • US Consumer rose for the 4th consecutive month to 92.40 in Aug 2014 from 90.3 in July 2014. The August number was highest since Oct 2007.
  • As per Congressional Budget Office (CBO) the US budget deficit is expected to come in lower at $506 bn for the year-ending 30th Sept 2014. The CBO had earlier projected a budget deficit on $480 bn in April. The budget deficit for the previous year stood at $680 bn.
  • German IFO Business Confidence Index fell to 13-month lows as it clocked 106.3 in Aug 2014 from 108 in July 2014. Market forecasts stood at 107.
  • German 10-yr yields fell to an all time low of 0.91% as the investors bought in expectations of ECB monetary stimulus. French, Italian, Spanish and Portugal bonds yields also dropped to record lows.
  • China’s HSBC MarkIt PMI showed a preliminary reading of 50.3 in Aug 2014 from 51.7 in July 2014. China’s official PMI as per National Bureau of Statistics stood at 51.1 in Aug 2014, lower than 51.7 in July 2014.
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