Feb 23, 2015
Money Markets:
  • The week ending on 20th February 15, witnessed an average daily net liquidity surplus under LAF at Rs.14,580 cr as compared to previous week’s average liquidity surplus of Rs.10,336 cr. The average MSF borrowing stood at Rs.32 cr. Total overnight liquidity surplus stood at Rs.14,612 cr.
  • Money markets during the week witnessed comfortable liquidity positions. Call rates stood unchanged at 7.72% for the week while in contrast CBLO rates continued to ease to register close of 7.66% against 7.71%.
G-Sec Market:

  • There was no weekly auction conducted by RBI as the Government borrowing for the current FY14-15 has come to an end.
  • The benchmark 10-yr security 8.40% GS 2024 stood unchanged to close at 7.69%. The G-sec market witnessed a thin range-bound trading during holiday shortened week. Traders refrained form taking positions waiting for the Budget release for further cues. The yields were supported by comfortable liquidity position and the absence of supply due to conclusion of the current year Government borrowing program.
  • As per our discussions in recent times, OIS continues to stay range bound for yet another week. The 5-yr OIS stayed unchanged from previous week levels to close at 6.91%; while the 1-yr OIS closed at 7.62%; 2 bps lower from previous week levels. The 1 – 5 yr spread remained unchanged at -73 bps levels.
  • RBI has decided to conduct Reverse Repo and MSF operations on Saturdays with effect form 21st Feb 2015.
Corporate Bonds
  • The major corporate debt issuances during the week were: Yes Bank issued 8.85% 10-yr debt paper to raise Rs.500 cr. Canara Bank issued 9.55% perpetual, Tier 1, BASEL III compliant bonds to raise Rs.1,500 cr. HDFC issued 9.10% 367-day debt paper to raise Rs.500.
  • RBI will conduct SDL auctions worth Rs.15,086 cr by auctioning 4/10 year papers on behalf of 16 State Governments.
  • NSE plans to auction FII g-sec limit worth Rs.617 cr on Monday 23rd Feb 2015.
  • RBI notified the revised guidelines on private placement of Non-Convertible Debentures by NBFCs.
Macro Indicators

  • RBI stated that nominated banks are now permitted to import gold on consignment basis while are free to grant gold metal loans. However, rest obligation would be according to 20:80 scheme.
  • Government approved proposals from 11 entities for an FDI amount of Rs 1075 crore. It also referred proposals of Rs 4187 crore of pharmaceutical firms to tbe Cabinet Committee of Economic Affairs.
  • India’s Wholesale Inflation came in at -0.39% renewing calls for a 50 bps rate cut by April 2015. Experts opine that a continuing disinflationary trend in March could be confirmation enough for Rajan to go ahead with lower rates.
  • India’s Consumer Price Inflation continues at 5.11% against expectation of 5.50%.
  • India’s coal auction seems to be proceeding on schedule 11 blocks being auctioned over the last ten days. However a coal shortage for e-auctions has meanwhile doubled the price to Rs 3000 per tonne over the last year, even as prices have fallen internationally.
Global Markets.
  • US Empire State Manufacturing Index marked at 7.8 for the month of February against 10 earlier. The new order business fell while shipment index climbed along with employment which was little changed.
  • Major event during the week was agreement between Greece and Euro zone nations to extend financial aid by four month after bailout talks. Agreement would be followed by Greece government officials submitting complete list of reforms.
  • Japan’s trade deficit for Jan 2015 stood at JPY 1.18 tn falling 60% YoY. Exports rose 17% YoY to JPY 6.10 tn whereas the imports sank 9% to JPY 7.32 tn helped by the fall in crude and gas imports.
  • US FOMC January 27th – 28th Jan 2015 meeting showed that few of the members expressed concerns over early rate hikes and felt that there are risks to the US recovery emanating form a weak global economy.
  • US jobless claims fell by 21,000 to 283,000 for the week ending 14th Feb 2015. The market forecasts expected a fall of 11,000.
  • The German Zew economic sentiment marked at 53.0 against 48.4 earlier but was lower than expectation. Even the Euro Zew Economic sentiment came at 52.7 against 45.2 earlier, suggesting that investor confidence is rising after stimulus package which is a positive sign for Euro zone.
  • UK January inflation fell to 0.3% against 0.5% earlier. The fall in inflation was due to tumbling oil prices globally along with fall in food prices. Easing inflation numbers could also delay hike in interest rate.
  • Monetary policy meet BOJ maintains its massive asset buying program of 80t yen and expects economy to recover moderately and hit the inflation target of 2% next fiscal.
  • US Philly Fed Manufacturing index marked at 5.2 against 63 earlier. The Manufacturing index slumped to 12 year low in February, clearly suggesting that the manufacturing activity is slowing down.

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