January 2015 | srei
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January 2015

RBI Cuts Rate Outside its Bi-Monthly Review Cycle

  • RBI, on January 15, 2015, reduced the policy repo rate under the liquidity adjustment facility (LAF) by 25 basis points from 8% to 7.75% with immediate effect; consequently, the reverse repo rate under the LAF stands adjusted to 6.75%, and the marginal standing facility (MSF) rate and the Bank Rate to 8.75% with immediate effect.
  • RBI kept the cash reserve ratio (CRR) of scheduled banks unchanged at 4% of net demand and time liabilities (NDTL) and decides to continue to provide liquidity under overnight repos at 0.25% of bank-wise NDTL at the LAF repo rate and liquidity under 7-day and 14-day term repos of up to 0.75% of NDTL of the banking system through auctions, and continue with daily variable rate repos and reverse repos to smooth liquidity.

Highlights of RBI’s Sixth Bi-Monthly Monetary Policy Statement 2014-15

  • RBI kept the policy repo rate under the liquidity adjustment facility (LAF) unchanged at 7.75%; consequently, the reverse repo rate under the LAF will remain unchanged at 6.75%, and the marginal standing facility (MSF) rate and the Bank Rate at 8.75%
  • kept the cash reserve ratio (CRR) of scheduled banks unchanged at 4.0% of net demand and time liabilities (NDTL)
  • reduced the statutory liquidity ratio (SLR) of scheduled commercial banks by 50 basis points from 22.0% to 21.5% of their NDTL with effect from the fortnight beginning February 7, 2015
  • replaced the export credit refinance (ECR) facility with the provision of system level liquidity with effect from February 7, 2015
  • continue to provide liquidity under overnight repos of 0.25% of bank-wise NDTL at the LAF repo rate and liquidity under 7-day and 14-day term repos of up to 0.75% of NDTL of the banking system through auctions and
  • continue with daily variable rate term repo and reverse repo auctions to smooth liquidity

Indian Economy Review

Prospects of Indian economic growth remain upbeat

IDespite the prevailing global economic volatility, major financial institutions and government officials are positive about the Indian growth story. The World Bank expects India's growth to accelerate to 6.4% in 2015 and then to 7% in each of the next two financial years, compared with an estimated 5.6% for the current year. The International Monetary Fund (IMF) cut the projections for India's economic growth slightly to 6.3% for 2015-16 against 6.4% made in October last year, while retaining the forecast for the current financial year at 5.6%; but it expects 6.5% growth in 2016 by when India is likely to cross China's projected growth rate. India’s Chief Economic Adviser Arvind Subramanian said prospects for the Indian economy look "very bright" with the remarkable turnaround witnessed in recent months on the back of lower current account deficit and the slew of reforms unleashed by the new government. Meanwhile, India raised its economic growth forecast to 6.9% from 4.7% in the fiscal year 2013-2014 after the government changed the formula to measure the economy; it also revised its GDP for 2012-13 to 5.1% from 4.5% earlier.

Domestic GDP Growth

Inflation rises slightly, but continues to be comfortable

India’s Consumer Price Index edged higher to 5% in December versus 4.38% in November, while inflation rate based on the WPI inched up to 0.11% in December from 0.00% in the previous month.

Government garners Rs 22,600 cr from divestment of Coal India, accelerates plan to divest other firms

The government raised around Rs 22,600 cr from the sale of 10% stake in Coal India; it also plans to sell another 5% of the company to comply with regulatory requirements. Further, the government is planning to sell 10% stake in Indian Oil Corp, National Aluminium Co. Ltd and NMDC Ltd, and reduce its stake in BHEL and Dredging Corporation of India by 5% to help meet its budget-deficit target for the fiscal year ending March. Further, the Ministry of Finance (MoF) plans to raise Rs 5,000 cr from the Central Public Sector Enterprises (CPSE) exchange-traded fund (ETF) by the end of 2014-15.

Major developments in the month

The US President announced $4 bn worth of new initiatives aimed at boosting trade and investment ties as well as jobs in India. India and the US renewed an enhanced Defence Framework Agreement for the next 10 years; they also reached a civil nuclear pact which could help clear stalled projects. India’s President Pranab Mukherjee signed an ordinance to amend the Mines and Mineral (Development and Regulation) Act. He also promulgated the Citizenship (Amendment) Ordinance, 2015 with immediate effect, paving the way for easier citizenship norms for People of Indian Origin (PIOs) as well as life-long visas. Further, he promulgated an ordinance to amend the Motor Vehicles Act, paving the way for plying of e-rickshaws in the national capital.

Finance Minister Arun Jaitley will present the first full-year budget on February 28 for the 2015-16 fiscal year. He said about Rs 33,000 cr in subsidies will flow into 10 cr beneficiary accounts in the next six months. The government hiked the excise duty on petrol and diesel twice in the month totaling Rs 4 per litre for each fuel so as to help it meet the fiscal deficit target. It also changed the excise duty structure on branded or premium diesel, shifting from fixed rates to a combination of ad valorem and fixed duty.

On the telecom front

The Cabinet gave its nod to a combined 2G and 3G auction. The government aims to garner Rs 64,840 cr through the auction; it has also decided to keep the reserve price for 2,100 MHz at Rs 3,705 cr per megahertz. Further, it has asked the Department of Telecom (DoT) to examine if it can impose a cess on the annual spectrum usage charge (SUC) that telecom companies pay for the Swachch Bharat campaign. It also approved the swapping of 15 MHz of the 2100 MHz spectrum band available with the Defence Ministry in return for an equivalent amount in the 1900 MHz band owned by the DoT. The government has decided to rope in the private sector to expedite the progress of the National Optical Fibre Network (NOFN), which has seen a cost overrun of 75% because of delays. Telecom Regulatory Authority of India (TRAI) issued draft regulations to facilitate full mobile number portability, which is set to start from May 3. It suggested that the Universal Service Obligation (USO) levy should be reduced to 3% of operators’ adjusted gross revenue from the current 5%. Meanwhile, the government decided not to appeal in the transfer pricing case it lost to Vodafone in the Bombay High Court.

Among other developments

The Ministry of Finance sent a letter to CEOs of all public sector banks, assuring them complete freedom in making commercial decisions and in transfers and postings of their executives; it also assured them of infusing capital before the end of the current financial year. Further, it agreed to the banks’ demand for commission for direct benefit transfer (DBT) transactions. The ministry rejected the proposal by the Department of Industrial Policy and Promotion (DIPP) seeking re-introduction of restrictions on royalty payments for preventing excessive outflow of foreign exchange.

The government decided to set up four steel plants in Chhattisgarh, Jharkhand, Odisha and Karnataka at an investment of Rs 1.5 lakh cr. It allowed developers to carry out infrastructure related work within special economic zones (SEZs). Government earmarked Rs 1,000 cr for the National Electric Mobility Mission Plan for the next two financial years in a move to boost electric vehicle sales, and approved an investment of Rs 996 cr for capital projects of the Central Power Research Institute (CPRI). The Ministry of Corporate Affairs came out with a revised roadmap for companies for implementation of Indian Accounting Standards converged with International Financial Reporting Standards for companies other than banking, insurance and NBFCs. The government exempted all companies with a foreign subsidiary from preparing consolidated financial statements (CFS) for the current fiscal. It allowed Indian companies to collaborate with unrelated entities for the purpose of corporate social responsibility spending.

The government said successful bidders of coal blocks in e-auctions will need to provide a bank guarantee equal to the aggregate of one-year royalty and the annual peak rated capacity of the mine multiplied by the winning bid amount. The Railway Ministry has decentralised the tender process to increase efficiency and speed up decisions; it has permitted zonal railways and heads of production units to finalise

The Environment Ministry exempted the building of large industrial sheds, schools, colleges and hostels of up to 1.5 lakh square metres from seeking a prior green nod for construction. The Food Ministry approved a proposal to increase the export subsidy on raw sugar to Rs 4,000 per tonne to help the cash-starved industry pay arrears to sugarcane farmers. The Agriculture Ministry unveiled draft guidelines of the "Price Stabilisation Fund" to be operationalised this fiscal for procurement and distribution of potato and onion.

Regulatory developments in the month

  • The RBI asked all credit institutions to become members of all credit information companies and submit all data, including historical data, to them within three months.
  • The central bank has made it mandatory to have a proven track record for considering the proposal of Overseas Direct Investments (ODI) by a proprietorship concern/unregistered partnership firm in India under the approval route.
  • Further, it directed entities offering services such as e-wallets, smart cards and White Label ATMs (WLAs) to prominently display their company name in products to ensure transparency.
  • The RBI has relaxed a longstanding rule for the Tata Group that bars local companies from paying more than the `fair value' price to buy out its Japanese partner's stake in their telecom joint venture.
  • Central Board of Direct Taxes (CBDT) has asked its officials to apply the principle behind a Bombay High Court ruling in favour of Vodafone in a transfer pricing case, for similar cases.

Among key economic indicators released in the month,

India’s fiscal deficit was Rs 5.32 lakh cr during April-December of 2014-15, surpassing the full-year budget estimate of Rs 5.31 lakh cr by 0.2%; for the corresponding period last year, the deficit was 93.9% of the full-year budget estimate. India’s direct tax collection during the first nine months of the current fiscal increased 12.93% to Rs 5.46 lakh cr over the same period a year ago, while indirect tax collections grew 6.7% to Rs 3.78 lakh cr representing 60.6% of the indirect taxes target for 2014-15. Trade deficit declined to a 10-month low of $9.43 bn in December mainly on account of falling imports due to slump in crude prices. Exports contracted by 3.77% in December after 7.2% growth last month, while imports declined by 4.78% against a sharp 26.79% growth in November.

According to a United Nations report on global investments, foreign direct investment inflows to India increased by about 26% to $35 bn in 2014 despite macroeconomic uncertainties and financial risks. India’s HSBC manufacturing Purchasing Managers' Index (PMI) rose to a two-year high of 54.5 in December compared with a 21-month high of 53.3 the previous month, while services PMI was 51.1 points in December compared with 52.6 a month earlier. SBI’s composite index, an indicator for tracking India's manufacturing activity, declined in January 2015 to 51.5 (low growth) from 55.4 (high growth) in December 2014.

Indicators Current Previous
Monthly WPI Inflation 0.11% (December 2014) 0.00% (November 2014)
Industrial Growth 3.8% (November 2014) -4.2% (October 2014)
Exports $241.16bn (April-December 2014) $231.83bn (April-December 2013)
Imports $351.21bn (April-December 2014) $338.91bn (April-December 2013)
Trade Deficit -$110.05bn (April-December 2014) -$107.08bn (April-December 2013)
Gross Tax Collections Rs 7,95,686cr (April-December 2014) Rs 7,43,709cr (April-December 2013)

IIP Growth

IIP Growth

  • India’s Index of Industrial Production came in at 3.8% for November versus -4.2% in October.

IIP-Core Sector Growth

Core IIP Growth

  • The growth rate of India’s eight core sector industries decelerated to a 3-month low of 2.4% in December, following growth of 6.7% in November.

Fiscal Deficit

Fiscal Deficit

  • India’s fiscal deficit stood at Rs 5.32 lakh cr during April-December of 2014-15, surpassing the full year Budget Estimate of Rs 5.31 lakh cr by 0.2%; for the corresponding period last year, the deficit was 93.9% of the full year Budget Estimate.

Global Economy Review

Global economic outlook remains glum

Prospects of the global economy darkened after the International Monetary Fund (IMF), in its World Economic Outlook report in January 2015, cut its growth forecast for the global economy citing a slowdown in China, Japan and the Eurozone, and increased geo-political risk. Global growth is pegged at 3.5% for 2015 and 3.7% for 2016, both 0.3 percentage points lower than the previous forecasts. To stimulate growth, the organisation has asked government authorities and central banks worldwide to work together to pursue accommodative monetary policies and structural reforms.

The US economic recovery gains traction

Accelerating economic recovery process in the US was acknowledged after the IMF upgraded its forecast for the US economy to 3.6% growth in 2015, up from 3.1% in October. The upgrade was on the back of lower oil prices boosting consumer spending and due to the US Federal Reserve’s (Fed) accommodative monetary broadly fueling growth. However, latest GDP data showed that the economic growth slowed to 2.6% (year on year) in Q4 compared with 5.0% in the previous quarter. In its latest monetary meeting, the Fed reiterated that it would be "patient" in deciding when to raise the benchmark interest rate. The Fed also stated that the factors holding inflation below its 2% target rate have intensified since its last meeting in December..

World GDP Growth

World GDP Growth

Major Indicators Current Previous Major Global Central Bank Major Global Central Bank
US GDP 2.6% Q4 2014 5.0% Q3 2014 US Fed Funds Rate 0-0.25%
US unemployment 5.7% Jan 2015 5.6% Dec 2014 Bank of England 0.50%
UK GDP 0.5% Q4 2014 0.7% Q3 2014 European Central Bank 0.05%
Euro Zone GDP 0.2% Q3 2014 0.1% Q2 2014 Japan Benchmark Rate 0-0.10%
Japan GDP -1.9% Q3 2014 -7.1% Q2 2014    
China GDP 7.3% Q4 2014 7.3% Q3 2014    
Singapore’s GDP 2.8% Q3 2014 2.3% Q2 2014    

Key US economic indicators

  • Trade deficit narrowed to an 11-month low of $39 bn in November compared to October’s downwardly revised deficit of $42.2 bn.
  • Consumer Price Index (CPI) inflation fell to 0.8% (lowest since October 2009) year-on-year in December from 1.3% in November.
  • Retail sales declined 0.9% in December after a 0.4% increase in November.
  • Non-farm payrolls increased by 257,000 in January, down from 329,000 in December; the unemployment rate rose to 5.7% from 5.6% a month earlier.
  • The US housing indicators - New home sales came in at a seasonally adjusted annual rate of 481,000 in December, above November’s revised reading of 431,000, while existing home sales rose to a seasonally adjusted annual rate of 5.04 mn in December from 4.92 mn units in November.


Eurozone economy in troubled waters

Eurozone, which is already suffering from slow growth and deflation, is confronted with another crisis-like situation in Greece. The political uncertainty surrounding Greece has compounded concerns for Eurozone. Winning of the Syriza party led by Alexis Tsipras in the Greece election has raised fear of Eurozone break-up. Alexis Tsipras has vowed to end austerity measures and renegotiate the nation’s bailout terms with the European Union. Meanwhile, noting the deteriorating economic condition in Eurozone, the European Central Bank (ECB) announced it would buy government bonds worth up to 60 bn euros per month until September 2016. The IMF lowered its forecast for the bloc to 1.2% this year, down from its earlier projection of 1.3% in October.

Key Eurozone economic indicators:

  • Trade balance was a surplus of 20 bn euros in November compared with a surplus of 23.6 bn euros in October.
  • Industrial production increased by a seasonally adjusted 0.2% in November, after rising 0.8% in October.
  • Annual inflation was -0.2% in December (the lowest rate recorded since September 2009), down from 0.3% in November.
  • Retail sales rose 0.6% in November, the same pace of growth as in October.
  • The unemployment rate was 11.5% in November, stable compared with October.

The UK posts fastest annual growth since 2007

The UK economy registered its fastest annual growth since 2007 of 2.6% in 2014. The economy grew 2.7% on year in Q4 2014 versus 2.6% growth in Q3. However, on a quarterly basis, 0.5% growth in Q3 was a dampener compared with 0.7% growth in the preceding quarter due to fall in construction output and falling industrial production. Bank of England held interest rates at 0.5% and kept the size of its bond-buying stimulus programme unchanged at 375 bn pounds.

Key UK economic indicators:

  • The visible trade gap fell to 8.8 bn pounds in November from 9.8 bn pounds in October.
  • The public sector net borrowing was 86.3 bn pounds from April to December, 0.1% lower than the same period in 2013-14.
  • Industrial production dropped 0.1% in November compared to a 0.3% decrease in October.
  • Unemployment dipped to 5.8% in the three months to November from 6.0% in the June-August period; the number of unemployed people fell by 58,000 to 1.91 mn in the three months to November.
  • Retail sales rose 0.4% in December after a 1.6% surge in November.
  • Annual consumer prices grew 0.5% in the year to December, down from 1% in November.


China struggles with slowdown

China’s economy expanded at its slowest pace since 1990 at 7.4% growth in 2014; the economy grew 7.3% year-on-year in Q4, same growth as seen in the previous quarter. The IMF trimmed its estimate for China’s growth to 6.8% this year, down 0.3% from October and expects it to slow down further to 6.3% in 2016.

Key Chinese economic indicators

  • Trade surplus for the country narrowed to $49.61 bn in December from $54.47 bn in November; exports rose 9.7% in December from a year earlier, up from a 4.7% rise in November while imports fell 2.4% from a year earlier, after a 6.7% fall in November.
  • Industrial production rose 7.9% year-on-year in December compared with 7.2% in November.
  • Retail sales jumped 11.9% year-on-year in December compared with 11.7% in the previous month.
  • Annual consumer prices gained 1.5% annually in December compared with a 1.4% increase in November.

Japan slashes inflation outlook

The Bank of Japan lowered its inflation outlook for fiscal 2015 starting in April to 1.0% from 1.7% due to plunging oil prices. The central bank, however, expects the economy to rebound in the coming fiscal year.

Key Japanese economic indicators:

  • Trade deficit narrowed to 660.7 bn yen in December compared to a shortfall of 893.5 bn yen in November; the trade deficit was 12.8 trillion yen in 2014.
  • Industrial production dropped a seasonally adjusted 0.5% in November compared to October’s growth of 0.4%.
  • Core Consumer Price Index - adjusted for volatile fresh-food prices and the impact of a national sales tax increase in April - fell to 0.7% in November from a 0.9% rise the previous month.

Singapore eased monetary policy

Singapore’s central bank eased its monetary policy to slow the appreciation of the Singapore dollar. The Monetary Authority of Singapore said that it will maintain the modest and gradual pace at which the Singapore dollar appreciates against a basket of other currencies, but reduce the slope of the band within which this trade-weighted exchange rate fluctuates.

Key Singapore’s economic indicators

  • Factory output fell 1.9% from a year earlier in December vs a 2.8% decline in November.
  • Consumer Price Index fell 0.2% year-on-year in December against a 0.3% decline in November.

Domestic Fixed Income Review

Domestic G-sec Yield

6 Month LIBOR

Interbank call money rates largely hovered above the repo rate for most parts of the month. The rates were primarily pressurised by tight liquidity conditions arising out of payments towards gilt auctions and state development loans. The demand for funds in expectation of a bank employee strike during the month coupled with regular demand from banks to meet mandatory reserve requirements pulled up the rates even more. Further spike in the rates was, however, restricted after the Reserve Bank of India (RBI) conducted regular term repo auctions during the month.

Indian government bond prices (gilts) ended the month in positive territory with the yield on the 10-year benchmark paper 8.40% 2024 falling to 7.69% on January 30, 2015, compared with 7.86% on December 31, 2014. Sentiments were mainly boosted by the RBI’s interest rate cut outside its bi-monthly policy cycle, leading to expectations of further rate cuts in the coming months; the RBI surprised the markets by slashing the benchmark repo rate by 25 bps to 7.75% on January 15. Bond prices also gained due to a lower-than-expected rise in December inflation numbers and the rupee’s sharp rise against the US dollar following the ECB’s decision to stimulate the Eurozone economy through bond purchases. Prices received further support after the Finance Minister said it was likely that the government would meet its fiscal deficit target for the current fiscal. Among global cues, intermittent decline in benchmark US Treasury yields and a plunge in global crude oil prices amid oversupply concerns buoyed the gilts further.

However, further gains in gilts were capped on fears that Greece may exit the Eurozone. Prices also fell as investors periodically took profits. Gilts were also impacted after RBI Executive Director G. Padmanabhan said that the supply of bonds may remain elevated despite the government’s fiscal consolidation efforts. A cautious stance adopted by participants ahead of the outcome of the two-day Federal Open Markets Committee (FOMC) meeting in the US weighed on prices further; the US Fed however later in the month reiterated that it would be "patient" in deciding when to raise benchmark borrowing costs from zero.

Major developments in the month

RBI Executive Director G. Padmanabhan cautioned against foreign "investment tourists" in debt markets, highlighting concerns about short-term flows. He added that the government’s gross borrowings are expected to remain high even after fiscal consolidation. SEBI said there is a need to enhance foreign investment limits in the Indian corporate bond market; the regulator added that current laws which grant powers of recovery in case of default by a company to only financial sector entities when investing in corporate bonds is a cause for concern. SEBI approved stricter norms for trustees managing issuance of securitised debt instruments as a part of efforts to boost investor confidence in securitisation transactions. According to SEBI data, Indian companies mopped up Rs 3.43 lakh cr through private placement of corporate bonds in 2014, an increase of 33% from the preceding year. S&P said the size of global bonds issued by Indian companies could almost double to $25 bn within a few years, with a majority of them likely to take place after 2015. CRISIL said that a "vibrant" corporate bond market is essential to provide the much-needed capital to fund India's long-term growth as banks will not be able to accomplish the objective solely on their own.

The SEBI has proposed a new set of norms for listing and trading of municipal bonds on stock exchanges. It also proposed allowing re-issuance of existing debt securities by a corporate issuer within a specified time rather than launching a new issue. According to SEBI data, fund raising by Indian companies through retail issuance of non-convertible debentures (NCDs) plunged by 58% to about Rs 7,300 cr in the first nine months of the current fiscal.

Among banking related developments, the RBI said the mark-up over the base rate charged to an existing borrower by banks should not be increased except on account of deterioration in the credit risk profile of the customer or change in the tenor premium. It also asked banks to notify the base, or minimum, lending rate at least once every three months based on the cost of funds. Further, it said banks will be allowed to review the base rate methodology after three years from the date it is finalised instead of the current periodicity of five years. The RBI asked banks to disclose more information on lending rates and fees for greater transparency to customers from April 1, 2015 on their websites. The RBI notified changes for leverage ratio under the Basel III norms for banks, to be implemented from April 1, 2015. The central bank signed an information sharing agreement with the US banking regulators for better coordination with them in supervising financial institutions. It also signed a Memorandum of Understanding (MoU) with ECB on cooperation in the field of central banking. The RBI introduced changes in external commercial borrowing norms under which authorised money changing banks have been allowed to create a charge on securities. The RBI allowed banks to act as brokers for insurers, set up their own subsidiaries and also undertake referral services for multiple companies. The RBI notified that the interest subvention of 2% on short-term crop loans will continue to be available to banks for the first year on the restructured amount. The RBI relaxed client due diligence measures for existing clients of non-banking finance companies (NBFCs) based on risk categorisation. The RBI allowed NBFCs to refinance fresh infrastructure project loans in five-seven-year intervals to improve project viability and debt-servicing capacity of their borrowers.


Fixed Income Indicators

Rates & Liquidity

  31-Jan-15 1 Week Ago 1 Month Ago
Repo 7.75 7.75 8.00
Reverse Repo 6.75 6.75 7.00
CRR 4.00 4.00 4.00
LAF o/s Repo (Rscr) 11851 19460 18037
LAF o/s Rev Repo (Rscr) 3464 2617 14407

Overnight                                 Rate(%)

  31-Jan-15 1 Week Ago 1 Month Ago
Mibor 7.53 7.86 9.01
Call 7.95 7.85 9.00
CBLO 7.72 7.80 8.83
OIS 1Y 7.49 7.52 7.76
OIS 5Y 6.79 6.80 7.20

CDs                                           Yield(%)

  31-Jan-15 1 Week Ago 1 Month Ago
1-Month 8.06 8.09 8.30
3-Month 8.56 8.48 8.55
6-Month 8.56 8.53 8.57
1-Year 08.60 8.57 8.60

CPs                                       Yield(%)

  31-Jan-15 1 Week Ago 1 Month Ago
1-Month 8.31 8.34 8.40
3-Month 9.01 8.96 9.08
6-Month 9.08 9.08 9.13
1-Year 9.02 9.08 9.14

Short Term Bonds                                                       Yield(%)

  31-Jan-15 1 Week Ago 1 Month Ago
1 Y G-Sec 8.02 7.94 8.21
1 Y AAA 8.23 8.28 8.68
1 Y AA 8.75 8.80 9.20
2 Y G-Sec 7.75 7.73 7.91
2 Y AAA 8.23 8.24 8.44
2 Y AA 8.70 8.71 8.91

Long Term Bonds                   Yield(%)

  31-Jan-15 1 Week Ago 1 Month Ago
5 Y G-Sec 7.67 7.65 7.97
5 Y AAA 8.23 8.25 8.57
5 Y AA 8.88 8.90 9.22
10 Y G-Sec 7.69 7.70 7.86
10 Y AAA 8.22 8.22 8.55
10 Y AA 9.04 9.04 9.37

Top 5 Graded G-Secs                                         Yield(%)

  31-Jan-15 1 Week Ago 1 Month Ago
08.40% CGL 2024 7.69 7.71 7.86
08.60% CGL 2028 7.72 7.73 7.92
08.27% CGL 2020 7.67 7.69 7.97
08.15% GS 2026 7.76 7.77 7.99
08.27% CGL 2020 7.63 7.64 7.86


  31-Jan-15 1 Week Ago 1 Month Ago
USD/INR 61.86


EURO/INR 70.03 69.62 77.00
GBP/INR 93.13 92.16 98.58
100 JPY/INR 52.40 51.95 52.93
USD/EURO 0.88 0.89 0.83

10 Year G-sec movement

 Corporate Bond Yield

Corporate AAA, AA Bond Spreads

Economic Events Calendar

February 12, 2015
  • US Retail Sales, January
  • US Business Inventories, December
  • Euro zone Industrial Production, December
  • UK RICS House Price Balance, January
  • Japan’s Producer’s Price Index, January
  • Japan’s Machine Orders, December
  • India’s Index of Industrial Production, December
  • India’s CPI for Combined, Rural, and Urban, January
February 27, 2015
  • US GDP, Q4 2014
  • US Chicago Purchasing Manager, February
  • US University of Michigan Confidence, February
  • US Pending Home Sales, January
  • UK GDP, Q4 2014
  • UK GfK Consumer Confidence, February
  • Japan’s Consumer Price Index, January
  • Japan’s Industrial Production, January
  • Japan’s Jobless Rate, January
  • India’s Economic Survey 2015-2016
  • India’s GDP, September-December
February 13, 2015
  • US University of Michigan Confidence, February
  • US Import Export Prices, January
  • Euro zone GDP, Q4 2014 - Adv estimate
  • Euro zone Trade Balance, December
February 28, 2015
  • UK Nationwide House Price Index, February
  • India’s Union Budget 2015-2016
February 16, 2015
  • Japan’s GDP, Q4 2014
  • Japan’s Industrial Production / Capacity Utilization, December
  • India’s Wholesale Price Index Inflation, January
March 1, 2015
  • China’s Official Manufacturing PMI, February
February 17, 2015
  • US NAHB Housing Market Index, February
  • US Empire Manufacturing (Mfg), February
  • UK Consumer Price Index, January
  • UK Producer Price Index, January
  • UK Retail Price Index, January
March 2, 2015
  • US ISM Manufacturing index, February
  • US Markit Manufacturing PMI, February
  • US Construction Spending, January
  • US Personal Income & Outlays, January
  • Euro zone Markit Eurozone Manufacturing PMI, February
  • Euro zone Unemployment Rate, January
  • Euro zone Consumer Price Index, February
  • UK Net Consumer Credit, January
  • UK Markit Manufacturing PMI, February
  • China’s HSBC Manufacturing PMI, February
February 18, 2015
  • US Federal Open Market Committee (FOMC) Meeting Minutes
  • US Housing Starts & Building Permits, January
  • US Producer Price Index, January
  • US Industrial Production / Capacity Utilization, January
  • Bank of England meeting minutes
  • UK Claimant Count Rate, January
  • UK ILO Unemployment Rate, December
  • Bank of Japan Monetary Policy Review
March 3, 2015
  • Euro zone Producer Price Index, January
  • UK Markit/CIPS Construction PMI, February
  • China’s Non-manufacturing PMI, February
February 19, 2015
  • US Markit US Manufacturing PMI, February
  • US Leading Index, January
  • Euro zone Markit Manufacturing, Services and Composite PMI, February
  • Euro zone Consumer Confidence, February
  • Japan’s Trade Balance, January
  • Japan’s All Industry Activity Index, December
March 4 , 2015
  • US ADP Employment Report, February
  • US Markit Composite, Services PMI, February
  • US ISM Non-Mfg Composite index, February
  • Euro zone Markit Services and Composite PMI, February
  • Euro zone Retail Sales, January
  • UK Markit/CIPS Services PMI, February
  • China’s HSBC Services and Composite PMI, February
February 20, 2015
  • UK Retail Sales, January
March 5, 2015
  • US Nonfarm Productivity, Q4 2014
  • US Factory Orders, January
  • Bank of England Monetary Policy Review
February 23, 2015
  • US Dallas Fed. Mfg Activity, February
  • US’ Chicago Fed National Activity Index, January
  • US Markit Services and Composite PMI, February
  • US Existing Sales, January
March 6, 2015
  • US Change in Nonfarm Payrolls, February
  • US Unemployment Rate, February
  • US Trade balance, January
  • Bank of England/GfK Inflation Report, February
  • Euro zone GDP, Q4 2014 – Preliminary
February 24, 2015
  • US Consumer Confidence Index, February
  • Euro zone Consumer Price Index, January
March 7, 2015
  • US Consumer Credit, January
February 25, 2015
  • US New Home Sales, January
  • China’s HSBC Manufacturing PMI, February
March 9, 2015
  • Euro zone Sentix Investor Confidence, March
  • Japan’s GDP, Q4 2014 – Final
  • Japan’s Eco Watchers Survey Outlook, Current, February
  • Japan’s Trade Balance, January
February 26, 2015
  • US Consumer Price Index, January
  • US Durable Goods Orders, January
  • Euro zone Business Climate Indicator, February
  • Euro zone Industrial, Consumer and Services Confidence, February
  • India’s Railway Budget 2015-2016
March 10, 2015
  • US Wholesale Inventories, January

US Fixed Income Markets - Overview

US treasuries strengthened in January with the yield of the benchmark 10 year bond falling from 2.17% on December 31 to 1.67% on January 30. Sentiment for bonds improved as investors intermittently exited equities noting the global decline in crude oil prices. Among other overseas cues, political uncertainty pertaining to Greece, the European Central Bank’s decision to expand monetary stimulus measures in the form of a monthly bond buying programme, and the Swiss National Bank’s decision to abandon the three year old cap on the Swiss Franc aided demand for treasuries. The US Federal Reserve’s latest assessment of the economy and some weak domestic data releases such as ISM manufacturing, retail sales, and durable goods orders helped bonds extend gains. However encouraging domestic housing and labor market data sparked concern that interest rates may be raised and limited further gains. The Central Bank of Canada’s surprise interest rate cut by 25 bps to 0.75% also weighed on prices.

US 10 Year Govt. Bond Yield

Learning Centre– Some Common Yield Measures

Bond holders like to know what their investment return will be for purchasing bonds. This is conveyed through the bond’s yield. Not every bond issuer uses the same term to convey the rate of return to the bond buyer. For instance, some issuers may provide the current yield and others use the yield to maturity (YTM). This note sheds some light on these terms.

Current yield:

The current yield is calculated by dividing a bond’s annual interest payment received by its current market price. For instance, if the annual interest payment (coupon amount) is Rs 100 and the bond’s current market price is Rs 1000, the current yield will be 10% (100/1000).

Investors should note that the current yield is a simplified measure as it takes into account only the interest payment as the source of return. It does not consider the capital appreciation that an investor realizes when a bond purchased at a discount is held to maturity. It also does not account for the capital loss suffered when bonds purchased at a premium are held to maturity. The fact that money earned today holds greater value than money earned in the future (time value of money) is also ignored by this measure.

Yield to maturity:

The yield to maturity gives investors a better picture of the return they will earn compared to the current yield. Yield to maturity reflects the interest earned by investing all coupon cash flows from the bond at a constant interest rate until the bond matures. The present value of the future cash flows is equated with the bond’s market price.

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