Apr 25, 2016
  • Money Markets:
  • The holiday shortened week ending on 22nd April 16, witnessed   an average overnight net liquidity deficit under LAF at Rs.11,045 cr as compared to previous week’s average liquidity surplus of Rs.2,604 cr. The daily average MSF borrowing stood at Rs.468 cr.
  • Money market rates remained high during the week; with call rates ending at 6.45% as against 6.40% in the previous week. The CBLO rates ended at 6.50%, from previous week’s 6.40%.
  • During the week, RBI injected total Rs.43,861 cr through term repos, whereas the RBI did not conduct any reverse repos.


  • G-Sec Market:
  • RBI conducted weekly auction for securities 7.68% GS 2023, 7.59% GS 2026, 7.73% GS 2034 and 8.13% GS 2045 for a total notified amount of Rs.15,000 cr. The cut-offs for the securities came in at 7.58%, 7.47%, 7.77% and 7.82% respectively. All the four securities were fully subscribed. The bid-cover ratio stood at 3.44 as compared to 2.53 in the previous auction.
  • The new benchmark 10-yr security 7.59% GS 2026   closed at 7.46%, 3 bps higher w-o-w. The G-sec market opened on a steady note with the softer crude prices following the OPEC meet in the earlier week ending without any decision on output cut. The prices remained supported as the SDL auctions witnessed better cut-offs and also the market participants expected further OMO announcement from the RBI. The G-sec market witnessed some profit booking mid-week as markets re-opened after holiday. Tight liquidity and surging crude prices pushed the benchmark 10-yr yields to almost 3-week highs intra-week.
  • The OIS curve ended flat WoW. The 5-yr OIS closed at 6.71%, unchanged from previous week levels; while the 1-yr OIS closed at 6.69%; 1 bp lower from previous week levels. The 1 – 5 yr spread widened by 1 bp to end at 2 bps levels.

  • Corporate Bonds
  • The corporate bond market witnessed a sell-off during the week. The 10-yr AAA bond traded at a yield of 8.15%, 15 bps higher from previous week levels of 8.00%. The yield on 1-yr AAA bond ended at 7.65%, 15 bps higher from previous week levels of 7.50%.
  • The major corporate debt issuances during the week were: National Housing Bank issued 7.56% 3-yr (1-yr Put/ Call Option) bond to raise Rs.1,000 cr. Exim Bank issued 8.02% 10-yr bond to raise Rs.350 cr.
  • RBI conducted 10-yr SDL paper auction on behalf of nine State Governments. Against a total notified amount of Rs.8,470 cr, RBI received bids worth Rs.35,360 cr of which it accepted Rs.9,265 cr with an additional retention for Gujarat and Tamil Nadu papers.
  • RBI has allowed Infrastructure Debt Funds (IDFs) to raise money through short-term bonds (<5yr) and commercial papers to the extent of 10% of their outstanding borrowings.
  • SEBI has made the electronic book mechanism mandatory for private placement of corporate bonds for quantum higher than Rs.500 cr. The move is aimed at reducing bidding time and better price discovery.
  • Power Minister Piyush Goyal stated that the PSU power companies like PFC, NTPC, REC and Neyveli Lignite plan to raise around $1 bn through issue of rupee denominated Masala bonds in the UK, within the next 4-5 months.

  • Macro Indicators
  • India’s exports declined 5.50% to $22.71 bn in Mar 2016,  whereas the imports declined 21.60% to $27.78 bn. The trade deficit at $5.07 bn in Mar 2016 was at its lowest in five years.
  • RBI revised the method of computation for the USDINR fixing. The rate will now be a volume weighted average of any 15 min window between 11:30 – 12:30. The transactions data will be from an electronic trading platform
  • India’s services exports stood at $12.34 bn in Feb 2016 whereas the services imports stood at $7.19 bn.
  • RBI Governor Rajan stated that the RBI will continue to intervene in the currency market in order to curb volatility.
  • India CPI inflation stood at 4.83% in Mar 2016. Whereas the WPI inflation stood at -0.85% in Mar 2016.
  • Global Markets
  • US Housing starts declined 8.80% in Mar 2016 to 108.9 mn units. While the building permits declined 7.70% to 108.6 mn units.
  • US Existing Home Sales rose by 5.10% in Mar 2016 at 5.33 mn units against 5.08 mn units in the previous month.
  • US Philly Fed Manufacturing Index dropped to -1.60 in Apr 2016 from a final reading of 12.4 in Mar 2016.
  • ECB kept the benchmark rate unchanged at 0.00% and held the deposit rate and marginal funding rate at -0.40% and 0.20% respectively.
  • Draghi sounded a dovish tone as he assured that the rates would remain at record lows for a long time and he also promised to use all the available tools as long as needed.
  • German PPI rose 0.00% MoM in Mar 2016 from -0.50% in Feb 2016.
  • Japan’s merchandise trade exports declined 6.80% YoY in Mar 2016, whereas the imports declined 14.9% YoY leaving a trade surplus of JPY 755 bn ($6.90 bn). The imports dropped for 15th consecutive month.
  • Japan’s Nikkei PMI Mfg index dropped to 48 in Apr 2016 from 49.1 in the previous month.
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