Oct 20, 2014
 Money Markets:
  • The truncated week ending on 17th October 14, witnessed an average daily net liquidity shortfall under LAF at Rs.1,897 cr as compared to previous week’s average surplus liquidity of Rs.5,296 cr. The average MSF borrowing stood at Rs.2,736 cr. Total overnight liquidity shortfall stood at Rs.4,633 cr.
  • Money market rates eased a little during the week; with call rates ending at 7.80% as against 8.00% in the previous week. The CBLO rates ended at 7.45%, from previous week’s 7.90%.
  • RBI conducted overnight and 2-day variable rate reverse repo auctions to extract Rs.14,645 cr. Also the RBI injected Rs.32,506 cr through 14-day term repo auctions.
 G-Sec Market:
  • RBI conducted weekly auction for securities 8.27% GS 2020, 8.60% GS 2028, 8.32% GS 2032 and 8.30% GS 2042 for a total notified amount of Rs.15,000 cr. The cut-offs for the securities came in at 8.48%, 8.53%, 8.58% and 8.58% respectively. All the four securities were fully subscribed with a bid-cover ratio of 3.63 as compared to 3.25 in the previous auction.
  • The new benchmark 10-yr security 8.40% GS 2024 closed at 8.39% 7 bps lower w-o-w. The G-sec market opened stronger on the back of lower CPI number. The g-sec prices rallied during the week as the WPI number touched 5-yr lows. The persistent weakness in the global crude prices added to the positive sentiment. The extra G-sec supply during the week on the back of OMO sales failed to deter the G-sec markets as the benchmark 10-yr yields touched a 13-month lows during the week.
  • The OIS curve witnessed sharp receiving across tenors. The 5-yr OIS closed at 7.56%, 16 bps lower from previous week levels; while the 1-yr OIS closed at 8.22%; 16 bps lower from previous week levels. The 1 – 5 yr spread remained unchanged on a weekly basis to end at -66 bps levels. The OIS swap curve may witness further receiving as the interest rate sentiment remains positive post lower inflation numbers and weakness in global crude prices.
  • RBI OMO sales of G-sec witnessed bids worth Rs.45,604 cr against an offered amount of Rs.10,000 cr, of which RBI accepted bids worth Rs.6,582 cr. RBI sold securities 8.79% GS 2021, 8.33% GS 2026 and 8.28% GS 2027 in the auction.
 Corporate Bonds
  • The corporate bond market continued to witness strong investor demand during the week. The 10-yr AAA bond traded at a yield of 8.98%, 7 bps lower than previous week levels of 9.05%. The yield on 1-yr AAA bond ended at 8.75%, 15 bps lower than previous week levels of 8.90%.
  • The major corporate debt issuances during the week were: SAIL issued 9% 10-yr bonds to raise Rs.1,000 cr. Oriental Bank of Commerce issued 9.20% 10-yr Tier 2, BASEL III compliant bonds to raise Rs.500 cr. Rural Electrification Corp issued 9.04% 5-yr bond to raise Rs.3,000 cr.
  • RBI conducted auction for 5/10 year SDL (State Development Loans) papers on behalf of 15 State Governments. Against notified amount of Rs.12,200 cr, RBI received bids worth Rs.51,401 cr of which it accepted bids worth Rs.12,450 cr as the Tamil Nadu SDL issuance lapped up extra Rs.250 cr.
  • NSE will auction Rs.646 cr worth of FII limit in G-sec on Tuesday 21st Oct 2014. The outstanding FII limit has reached 99.48% as on 17th Oct.
 Macro Indicators
  • India’s exports grew by 7.20% MoM to $28.9 bn in Sept 2014. The imports registered a growth of 14.15% MoM to clock $43.15 bn. India’s trade deficit climbed to $14.3 bn in Sept 2014 from $10.84 bn in the previous month.
  • Government has appointed IMF official Arvind Subramaniam as the Chief Economic Advisor.
  • Indian Oil Companies will be clearing another $400 mn of dues to Iran after clearing $1.65 bn of dues in June Jul 2014 period. The payments will happen through rupee equivalent funds which will be deposited Kolkata’s UCO bank.
  • India’s CPI inflation stood at 6.46% in September 2014 as against 7.80% in August 2014.
  • Monthly WPI inflation stood at 2.38% in September 2014, as against 3.74% in August 2014. The September number was a fresh 5-year low.
 Global Markets.
  • US Retail Sales fell 0.30% in Sept 2014 after a 0.60% in Aug 2014. The September number was at 4-month as the forecasts expected a 0.10%. The drop in automobile spending was the highlight.
  • ST.Louis Fed President Bullard said that the Fed should consider delaying the QE tapering as the stagnation of global economic growth poses threats to the US recovery.
  • European sovereign bonds witnessed a crash as the investors sold Greek, Italian, Spanish and French bonds in search of safe haven assets like German bunds and US treasuries.
  • UK inflation dropped to 5-year lows at 1.20% in Sept 2014 against 1.50% in Aug 2014.
  • Japanese Industrial production fell 3.30% YoY in Aug 204 against a 0.70% decline in041041 July 2014.
  • Russia’s credit rating was downgraded by Moody’s by one notch to Baa2 from Baa1 with a negative outlook. The downgrade was on the back of struggling economy and the fall in the country’s forex reserves.
  • US treasury department’s bi-annual report to Congress on Foreign Exchange mentioned that the China’s currency policy remains incomplete and China should allow market factors to play a larger role in the determination of the Yuan value.

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