May 2016 | srei
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May 2016

Highlights of RBI’s Second Bi-Monthly Monetary Policy Review for 2016-17

RBI decided to:

  • keep the policy repo rate under the liquidity adjustment facility (LAF) unchanged at 6.5%;
  • consequently, the reverse repo rate under the LAF will remain unchanged at 6%, and the marginal standing facility (MSF) rate and the Bank Rate at 7%;
  • keep the cash reserve ratio (CRR) of scheduled banks unchanged at 4% of net demand and time liabilities (NDTL);
  • continue to provide liquidity as required but progressively lower the average ex ante liquidity deficit in the system from one per cent of NDTL to a position closer to neutrality.
  • it is maintaining an accommodative monetary policy stance and may cut policy rates further should room for easing emerge.
  • to focus on achieving 5% consumer price inflation by end-March 2017.

Indian Economy Review

India reinforces its position as the fastest growing economy

Boosted by 7.9% growth in the fourth quarter, the Indian economy clocked 7.6% growth in fiscal 2015-16, fortifying its position as the world’s fastest growing economy. International and domestic institutions are upbeat about India for the current and next fiscal too. The International Monetary Fund (IMF) has retained its growth forecast for this financial year at 7.5%, largely driven by private consumption. Moody's Investors Service has forecast close to 7.5% growth rate for India in 2016 and 2017. Fitch Ratings expects India's real GDP to grow 8% in 2018-19, up from 7.9% in 2017-18 and 7.7% in 2016-17, owing to gradual implementation of structural reforms. On a slightly cautionary note, Standard and Poor’s Global Ratings believes that though India is likely to remain insulated from developments in China, the government will have to carry out structural reforms to take the economy to 8% growth path.

Back home, Finance Minister Arun Jaitley said India can grow at an even faster pace this year if predictions of good monsoon hold up. Economic Affairs Secretary said the economy may expand by around 8% this fiscal due to the government’s measures to revive private investment and the positive impact of a likely normal monsoon. Confederation of Indian Industry (CII) also expects the Indian economy to grow at 8% this fiscal. National Council of Applied Economic Research has raised India’s economic growth forecast to 7.6% for 2015-16 from 7.4% projected earlier and estimates 7.7% growth in 2016-17.

Domestic GDP Growth


Inflation advances in April

India’s retail inflation, as measured by the Consumer Price Index (CPI), increased to 5.39% in April from 4.83% in March, while wholesale price inflation rose 0.34% in April, after 17 straight months of fall, from -0.85% in March.

Government lines up stake sales and share buybacks as part of its divestment plans

The Central government is planning initial public offerings in Cochin Shipyard, Housing and Urban Development Corporation, Hindustan Aeronautics Ltd and Rashtriya Ispat Nigam in 2016-17 to mop up around Rs 8,000 crore. It is also planning to sell 15% stake each in MMTC Ltd, State Trading Corporation of India Ltd and National Fertilizers; 10% each in NMDC and Oil India; and 5% in Rashtriya Chemicals and Fertilizers. It aims to raise Rs 6,400 crore in the first half of 2016-17. It is considering divesting its stake in Indian Renewable Energy Development Agency (IREDA). The Centre is also hoping to raise at least Rs 10,000 crore from share buybacks by cash-rich public sector undertakings (PSUs) this fiscal. The finance minister said cash-rich PSUs could buy back their shares, followed by strategic stake sales once the market improves. Meanwhile, the government raised Rs 237 crore by selling a small portion of its holding in Indian Oil Corporation to employees of the company.

India signed various international pacts mainly related to taxation

  • The country amended its tax avoidance treaty with Mauritius, to get rights to tax capital gains on shares of Indian companies sold after April 1, 2017.
  • India and five other nations, including China and Israel, signed a pact for automatic exchange of information on tax issues, and to develop new tools and standards for tackling tax base erosion and evasion.
  • India signed a multilateral pact that will help it gain better understanding on the way multinational companies structure their operations around the world and allocate incomes and pay taxes.
  • India and Slovenia signed a protocol to amend an existing double taxation avoidance treaty between the two countries.
  • India and Iran inked a dozen agreements ranging from a contract to develop the strategic Chahabar Port to an initial pact to set up an aluminium plant and one on laying a railway line to give India access to Afghanistan and Central Asia.

The Cabinet took the following key decisions:

  • Approved the first-ever policy for India’s capital goods sector envisaging creation of over 21 million new jobs by 2025.
  • Approved an investment of Rs 10,736 crore in five railway projects, involving decongestion of the existing network, through doubling and tripling of the existing lines.
  • Approved the national Intellectual Property Rights policy to promote creativity, innovation and entrepreneurship.
  • Approved a proposal to relax norms for utilisation of domestic coal aimed at lowering the cost of power generation.

Other major developments in the month

The government said the auction of coal blocks will fetch Rs 3.45 lakh crore and Rs 36,500 crore would be saved on account of checking leakages through the direct benefit transfer scheme for LPG subsidy. It announced the auction of 67 discovered small oil and gas fields, holding about Rs 70,000 crore worth of hydrocarbon reserves. The first round of bidding for fields will start from July 15 and end on October 31. The government prepared a plan to raise up to Rs 60,000 crore over the next six months by offering 104 existing tollable road projects on lease to private players. It also cleared 74 investment proposals worth Rs 17,300 crore in the electronics manufacturing sector. Further, it allowed 100% foreign direct investment (FDI) in asset reconstruction companies (ARCs) under the automatic route. The government set up an e-marketplace for procuring common use goods and services. It announced a series of measures to keep prices of essential commodities under check during the festival months of July to December. It also withdrew the notification on licensing of genetically modified seed technology and placed it as a draft for public consultation. The government granted infrastructure status to the shipyard industry.

Regulatory developments in the month

The RBI started the process of issuing ‘master circulars’ on various regulatory issues to simplify the communication process. It also gave licences to two more asset reconstruction companies (ARCs) - Omkara ARC and Meliora ARC. Telecom Regulatory Authority of India (TRAI) has recommended auctioning the entire available spectrum, including airwaves in the 700 Mhz band, for the first time. National Housing Bank has asked mortgage firms to share information on default of Rs 25 lakh and above by wilful defaulters so that further credit to such borrowers is choked. Competition Commission of India (CCI) has eased mergers and acquisitions rules; investors already holding 25% or more as shares or voting rights in a firm can now raise their stake to the 50% threshold without prior approval of the competition regulator. CCI cleared the proposed acquisition of Sharekhan by BNP Paribas and also approved General Atlantic’s proposed acquisition of 21.61% stake in IIFL Wealth Management for about Rs 1,122 crore. It gave a nod to Cipla to sell about 26% stake in its consumer healthcare business to FIL Capital Investments and also approved American Tower Corporation’s Rs 7,635 crore stake purchase in Viom Networks. National Pharmaceutical Pricing Authority (NPPA) has extended the deadline for pharmaceutical firms to register themselves with pharma data bank by a month to February 15. The Supreme Court said real estate developers must get environment clearance before starting construction work.

The government notified raising the threshold limit of provident fund withdrawal for deduction of tax (TDS) from existing Rs 30,000 to Rs 50,000. It rolled back its budget decision to apply 1% tax collection at source on cash purchase of gold jewellery of Rs 2 lakh and above, and raised the threshold to the earlier Rs 5 lakh. Further, it announced rules for equalisation levy or ‘Google tax’ for taxation of payments for international digital services by Indian businesses. It also issued draft norms for development of onshore wind power projects. The government decided to replace five-year plans with 15-year vision documents. It partly rolled back import duty on mobile phone components. It also asked LIC to contribute 10% of the investment corpus to the National Investment and Infrastructure Fund (NIIF). The government dropped a plan to convert 11 of the 12 ports it owns into corporate entities from a trustee set-up.

Both the Lok Sabha and the Rajya Sabha passed the Insolvency and Bankruptcy Bill, 2016. They also approved the Finance Bill that would enable the government to implement new tax provisions of the annual budget and set up a panel to decide interest rates and monetary policy. Finance Minister Arun Jaitley rejected demands for rollback of 1% excise duty on non-silver jewellery and asserted that jewellers will have to pay taxes. The Ministry of Finance said fresh capital to public sector banks will be linked to their performance, especially recoveries done by them. It also said the 0.5% Krishi Kalyan Cess will apply to all taxable services, and CENVAT (central value-added tax) credit will be available to service providers on the cess paid on input services. Further, it said ministers can now approve non-plan expenditure proposals of up to Rs 500 crore as against the earlier limit of Rs 150 cr. It imposed definitive anti-dumping duty on 'measuring tapes' from Malaysia, Thailand, Vietnam and Taiwan.

The Centre approved 10 foreign direct investment (FDI) proposals worth Rs 579 crore. It also relaxed leave travel concession rules. It will now reimburse full train fare incurred by its employees on purchase of tickets for their children aged between five and 12 years. It asked states to opt for Direct Benefit Transfer scheme for food subsidy. The Ministry of Defence agreed to vacate telecom spectrum worth Rs 30,000 crore that will be put up for sale in the auction scheduled to begin in July. The World Bank approved a $625 million loan to support the Indian government’s programme to generate electricity from rooftop solar power plants.

Among regulatory developments

The Reserve Bank of India (RBI) allowed higher FDI limits in credit information companies having an established track record of running a credit information bureau. Competition Appellate Tribunal overturned an order of the Competition Commission of India (CCI) imposing a fine of Rs 1,773 crore on Coal India. CCI approved the acquisition of DT Cinemas by PVR, subject to exclusion of certain assets. It also approved DBS Bank’s proposal to acquire the corporate loans business from RBS in India. The Supreme Court struck down the Telecom Regulatory Authority of India’s order asking telecom companies to pay compensation for call drops. The Department of Telecom asked telecom companies to align their spectrum frequencies by June 15. The Central Electricity Authority said government-funded power projects will have to use locally-made equipment and material. Central Board of Direct Taxes (CBDT) issued draft rules to specify the manner in which ‘fair market value’ of assets of foreign company with underlying Indian assets be computed. It also issued a series of clarifications for the roll out of the Foreign Account Tax Compliance Act and the Common Reporting Standards. It said that income from sale of unlisted equities will be treated as capital gains. Further, it said people with annual income of over Rs 50 lakh will have to disclose the acquisition cost of all assets like land, building and jewellery in the income tax return forms for assessment year 2016-17.

Major economic indicators released in the month

India’s industrial output, measured by Index of Industrial Production (IIP), decreased sharply to 0.1% in March versus 2% in February. Core sector growth jumped to 8.5% in April due to sharp pick-up in refinery products and a commensurate rise in electricity generation; the index gained 6.4% in March. The country’s exports fell 6.74% in April compared with a 5.47% decline in March, while imports plunged 23.1% in April, resulting in a trade deficit of $4.8 billion in April compared with $5.1 billion in March. India’s fiscal deficit in April was Rs 1.37 lakh crore or 25.7% of its budgeted target of Rs 5.34 lakh crore for 2016-17. The Centre’s fiscal deficit in 2015-16 was marginally higher at 3.92% of the GDP as against the targeted 3.9%. According to data from the Department of Industrial Policy and Promotion, FDI into India increased by 16.5% to $2.46 billion in March this year. The government’s indirect tax collections surged 41% to Rs 64,394 crore in April compared with Rs 45,417 crore in the same month last year.

India’s Nikkei Purchasing Managers’ Index (PMI) decreased to 50.50 in April from the eight-month high of 52.4 in March, while services PMI fell to a four-month low of 53.7 in April from 54.3 in March.

Indicators Current Previous
Monthly WPI Inflation 0.34% (April 2016) -0.85% (March 2016)
Industrial Growth 0.10% (March 2016) 2.0% (February 2016)
Exports $20.57bn (April 2016) $22.05bn (April 2015)
Imports $25.41bn (April 2016) $33.05bn (April 2015)
Trade Balance - $4.84bn (April 2016) -$11bn (April 2015)
Gross Tax Collections Rs 1,456,887cr (April-March 2015-16) Rs 1,244,884cr (April-March 2014-15)

IIP Growth

IIP Growth

  • India’s industrial output, measured by Index of Industrial Production (IIP), decreased sharply to 0.1% in March versus 2% in February.

IIP-Core Sector Growth

Core IIP Growth

  • India’s core sector growth jumped to 8.5% in April due to sharp pick-up in refinery products and a commensurate rise in electricity generation; the index gained 6.4% in March.

Fiscal Deficit

  • India’s fiscal deficit in April was Rs 1.37 lakh cr or 25.7% of its budgeted target of Rs 5.34 lakh cr for 2016-17; the Centre’s fiscal deficit in 2015-16 was marginally higher at 3.92% of the GDP as against the targeted 3.9%.

Fiscal Deficit

Global Economy Review

US Federal Reserve signals rate hike in June

The US Federal Reserve (Fed) indicated in the minutes of its policy meeting in April that it may hike interest rates in the June meeting if economic data points to an improvement in Q2 2016 GDP growth, and firming inflation and employment. At its April meeting, the Fed kept key rates unchanged in a range of 0.25-0.50%. Meanwhile, the second estimate for US GDP growth data showed that the economy expanded at a revised pace of annualised 0.8% in Q1 2016 compared with the previous estimate of 0.5%, and following 1.4% growth in Q4 2015.

World GDP Growth

World GDP Growth

Major Indicators Current Previous Major Global Central Bank Latest Key Interest Rates
US GDP 0.8% Q1 2016 1.4% Q4 2015 US Fed Funds Rate 0.25-0.50%
US unemployment 4.7% May 2016 5% April 2016 Bank of England 0.50%
UK GDP 2.0% Q1 2016 2.1% Q4 2015 European Central Bank 0.05%
Euro Zone GDP 1.7% Q1 2016 1.7% Q4 2015 Japan Benchmark Rate 0-0.10%
Japan GDP 1.9% Q1 2016 -1.1% Q4 2015    
China GDP 6.7% Q1 2016 6.8% Q4 2015    
Singapore’s GDP 1.8% Q1 2016 1.8% Q4 2015    

Key economic indicators

  • Trade gap rose 5.3% to $37.4 bn in April; March's trade deficit was revised down to $35.5 bn.
  • Import prices increased 0.3% in April after an upwardly revised 0.3% gain in March. Export prices increased 0.5% in April, the largest rise since May 2015, after being flat in March.
  • Industrial production rose 0.7% in April after falling 0.9% in March.
  • The nonfarm payrolls rose by a seasonally adjusted 38,000 in May versus 123,000 in April; the unemployment rate dropped to 4.7% in May from 5% in April.
  • Retail sales jumped 1.3% in April, the largest gain since March 2015. Retail sales in March were revised to show a 0.3% decline.
  • Consumer prices increased 0.4% in April, the largest gain since February 2013, after a marginal 0.1% rise in March.
  • In the housing sector, new home sales jumped 16.6% to a seasonally adjusted annual rate of 619,000 units in April, the highest level since January 2008, compared to a revised March figure of 531,000 units. Existing home sales rose in April to an annual rate of 5.45 million units. March's sales pace was revised slightly higher to 5.36 million units.


Eurozone Q1 2016 GDP growth revised upward to 0.6%

The Eurozone upward revised its final estimate of Q1 2016 GDP growth to 0.6% quarter-on-quarter (q-o-q) from second estimate of 0.5%. Year-on-year (y-o-y) growth for the same period was revised to 1.7% from 1.5% estimated earlier. The minutes of European Central Bank’s (ECB’s) April meeting stated that policy makers agreed to the need to defend the bank against a growing number of critics, as its ultra-easy policy came under fire in Germany and elsewhere.

Key Eurozone economic indicators:

  • The trade surplus in goods was 28.6 billion euro in March 2016 compared with 19.9 billion euro surplus in March 2015.
  • Industrial production fell 0.8% in March compared to a fall of 1.2% in February.
  • Annual inflation came in at -0.1% in May, up from -0.2% in April.
  • The manufacturing Purchasing Managers’ Index (PMI) came in at 51.5 in May compared with 51.7 in April.
  • The seasonally-adjusted unemployment rate was 10.2% in April, stable compared with March, and down from 11% in April 2015.
  • The Eurozone’s ZEW 'Economic Sentiment' index fell to 16.8 in May from 21.5 in April.

Bank of England warns Brexit may negatively impact UK economy

In the UK, the Bank of England voted to keep the benchmark interest rate and asset purchase program unchanged at 0.5% and 375 billion pounds, respectively. The central bank also warned in its quarterly inflation report that a vote for Britain’s exit (commonly termed as Brexit) from the European Union could cost jobs, raise prices, see the pound fall sharply, and possibly lead to recession. The second estimate for Q1 2016 GDP in the country showed the economy grew 2% y-o-y, down slightly from the flash estimate of 2.1%.

Key UK economic indicators:

  • Trade deficit fell to 11.2 billion pounds in March from 11.4 billion pounds in February.
  • Industrial production rose 0.3% in March following a 0.2% decline in February.
  • Retail sales increased 1.3% in April following a revised 0.5% decline in March.
  • Consumer prices gained only 0.1% month-on-month in April after rising 0.4% in March.
  • The unemployment rate held steady in the three months to March at 5.1%, compared to the December-February period.


IMF lowers Asia’s growth outlook

The International Monetary Fund (IMF) lowered Asia’s growth projection to 5.3% each for 2016 and 2017, down from its previous forecast of 5.4%. The IMF said China and Japan are expected to slow down sharply over the next two years but Asia’s growth will remain strong as domestic demand takes up the slack from weak global trade.

China’s central bank to keep monetary policy slightly loose

The People’s Bank of China, in its research paper, stated that it will stick to a generally prudent monetary policy, thereby playing down expectations of tightening. The central bank’s monetary policy analysis team said in the report that it would create an environment that was appropriate for structural reform.

Key Economic Indicators

  • Exports fell 1.8% from a year earlier in April after a surprise 11.5% rise in March, while imports fell 10.9% after falling 7.6% in March, thereby resulting in a trade surplus of $45.56 billion for April.
  • The official PMI came in at 50.1 in April compared with 50.2 in March, while non-manufacturing PMI stood at 53.5 in April against 53.8 in March.
  • Retail sales grew by a less-than-expected 10.1% in April compared with a year earlier, slowing from March’s 10.5% y-o-y rise.
  • Fixed asset investments grew 10.5% y-o-y in the January-April period compared with an annual increase of 10.7% for the first three months of 2016.
  • The Consumer Price Index (CPI) rose 2.3% y-o-y in April, same as in March.

Japan’s GDP expands 1.9% in Q1 2016

Japan’s GDP expanded by 0.5% q-o-q and 1.9% y-o-y in Q1 2016 compared with contraction of 0.4% q-o-q and 1.1% y-o-y in the preceding quarter. Bank of Japan Governor Haruhiko Kuroda said that the central bank would not hesitate in easing the monetary policy further if the market moves, including a spike in the yen, threatened prospects for achieving its 2% inflation target.

Key Japanese economic indicators:

  • The trade balance rose to 0.43 trillion yen in April from 0.3 trillion yen in March.
  • Industrial production rose 0.3% month-on-month in April, compared with a 3.8% gain in March.
  • Retail sales were unchanged in April from the previous month.
  • The leading index rose to 99.3 in March from 98.9 in February. The coincident index climbed to 111.1 in March from 110.7 in the previous month.
  • Manufacturing PMI fell to 47.6 in May from 48.2 in April.
  • The nationwide core CPI fell 0.3% in April from a year earlier, matching the drop in March, which was the biggest annual decline in three years.

IMF projects Singapore’s economy to grow at 1.8% in 2016

The IMF said that the Singapore’s economic growth will slow to 1.8% this year before improving to 2.5% in 2017. The country’s GDP growth was 2% in 2015, the weakest pace since 2009. Among key economic indicators, the country’s non-oil domestic exports (NODX) fell 7.9% y-o-y in April following a revised 15.7% in the preceding month. Industrial production rose to an annual rate of 2.9% from 0.1% in the preceding month.

Domestic Fixed Income Review

Domestic G-sec Yield

6 Month LIBOR

Interbank call money rates remained below the repo rate of 6.50% for most parts of the month. Inflows from the government’s month-end spending, coupled with periodic fund infusion from the central bank through repo auctions, helped in keeping call rates low. Sporadic open market bond purchase operations from the RBI also contributed to the fall in inter-bank rates. However, some pressure was seen on the rates owing to redemption of repo auctions and outflows towards payment of gilts, state development bonds and value-added taxes.

Government bond prices (gilts) moved in a tight range in the month. Yield on the 10-year benchmark – the 7.59%, 2026 paper – ended at 7.47% on May 31, 2016, compared with 7.44% on April 29, 2016. Gilts were primarily buoyed by intermittent open market bond purchases by the RBI. However, gains were erased on tracking sporadic upward movement in global crude oil prices and US benchmark treasury yields. Bonds were also put under pressure as the rupee weakened against the US dollar on concerns that the amendment to the tax treaty between India and Mauritius will affect dollar flows in the long term. Prices fell further following the release of domestic consumer inflation data for April and as market players trimmed positions to absorb the fresh supply of bonds from some weekly sales. Sentiments were also affected as the minutes of the US Federal Open Market Committee's April policy meeting led to investors scaling up expectation of a June rate hike by the US central bank.

Among major developments, the government said trading of Sovereign Gold Bonds will begin by month-end and the fourth tranche of the scheme will be launched thereafter. Power Minister Piyush Goyal said bonds worth Rs 1.5-1.75 lakh crore are to be issued under the Uday scheme in FY17. RBI executive director Chandan Sinha said India will make it compulsory for companies to raise funds via corporate bonds for some projects such as infrastructure. The RBI allowed foreign portfolio investors to invest in unlisted debt securities as well as securitized debt instruments. It also said that entities regulated by the central bank, Securities and Exchange Board of India (SEBI), Insurance Regulatory Development Authority of India, Pension Fund Regulatory and Development Authority and the National Housing Bank can trade in interest rate swaps on electronic trading platforms. Further, it proposed the introduction of margin requirements for derivative contracts that are not cleared by central counter parties. SEBI to come out with guidelines for exchange-traded repos. The Bombay Stock Exchange decided to introduce new interest rate futures contracts, with the newly-launched government bonds maturing in 2030 as its underlying.

Among banking related developments, RBI Deputy Governor R Gandhi said the central bank will continue reviewing the asset quality at commercial banks this fiscal. Deputy Governor S Mundra said there is room for consolidation in the banking sector. He also said banks should increase the provision coverage ratio and aim to raise it to 70%. In addition, he said the central bank is examining limiting a customer's liability in banking frauds and will soon put in place a framework for the same. The RBI came out with draft guidelines for issuing on-tap universal bank licences. The central bank said it is willing to share details of borrowers who have taken large loans of over Rs 5 crore with the government if vigilance and investigative agencies require the information, or for court cases. It also proposed to increase provisioning and risk weights for fresh loans given to highly leveraged companies. The RBI tweaked the guidelines on ownership in private sector banks by bundling shareholding patterns into two broad categories of natural persons and legal persons, but retains the cap on foreign ownership at 74%. Further, it allowed foreign banks to invest up to 10% in local private lenders and supranational institutions. The RBI asked banks to avoid approving long-term credit for periods up to 10 years under the garb of working capital loans to stressed companies. It directed all banks and white label ATM operators to have chip-and-pin based card acceptance infrastructure. It also notified that the modified strategic debt restructuring mechanism will now be made applicable to non-banking finance companies as well.


Fixed Income Indicators

Rates & Liquidity

  31-May-16 1 Week Ago 1 Month Ago
Repo 6.50 6.50 6.50
Reverse Repo 6.00 6.00 6.00
CRR 4.00 4.00 4.00
LAF o/s Repo (Rscr) 8785 21158 10300
LAF o/s Rev Repo (Rscr) 7790 2314 15175

Overnight                                         Rate(%)

  31-May-16 1 Week Ago 1 Month Ago
Mibor 6.54 6.55 6.57
Call 6.30 6.55 6.65
CBLO 6.45 6.60 5.37
OIS 1Y 6.68 6.68 6.67
OIS 5Y 6.77 6.76 6.70

CDs                                                             Yield(%)

  31-May-16 1 Week Ago 1 Month Ago
1-Month 6.80 6.91 6.95
3-Month 7.17 7.15 7.35
6-Month 7.29 7.27 7.38
1-Year 7.43 7.41 7.48

CPs                                                   Yield(%)

  31-May-16 1 Week Ago 1 Month Ago
1-Month 7.90 7.90 7.93
3-Month 8.07 8.05 8.44
6-Month 8.36 8.35 8.50
1-Year 8.51 8.50 8.50

Short Term Bonds                                        Yield(%)

  31-May-16 1 Week Ago 1 Month Ago
1 Y G-Sec 7.03 7.03 7.04
1 Y AAA 7.68 7.65 7.73
1 Y AA 8.20 8.17 8.25
2 Y G-Sec 7.12 7.12 7.16
2 Y AAA 7.80 7.80 7.75
2 Y AA 8.27 8.27 8.22

Long Term Bonds                          Yield(%)

  31-May-16 1 Week Ago 1 Month Ago
5 Y G-Sec 7.44 7.43 7.46
5 Y AAA 8.11 8.08 8.08
5 Y AA 8.76 8.73 8.73
10 Y G-Sec 7.47 7.47 7.44
10 Y AAA 8.20 8.20 8.15
10 Y AA 9.02 9.02 8.97

Top 5 Graded G Secs                                   Yield(%)

  31-May-16 1 Week Ago 1 Month Ago
07.59% GS 2026 7.47 7.46 7.44
08.27% GS 2020 7.35 7.34 7.38
07.88% GS 2030 7.76 7.75 7.74
07.59% GS 2029 7.69 7.68 7.61
07.28% GS 2019 7.22 7.22 7.27


  31-May-16 1 Week Ago 1 Month Ago
USD/INR 67.26 67.75 66.34
EURO/INR 74.79 75.93 75.73
GBP/INR 98.65 98.07 97.40
100 JPY/INR 60.40 61.97 61.96
USD/EURO 0.90 0.90 0.87


10 Year G-sec movement


Corporate Bond Yield


Corporate AAA, AA Bond Spreads


Economic Events Calendar

June 13, 2016
  • India’s Consumer Price Index, May
  June 28, 2016
  • US GDP, Q1 2016
  • US S&P Case-Shiller HPI, April
  • US Consumer Confidence, June
June 14, 2016
  • US Retail Sales, May
  • US Import and Export Prices, May
  • US Business Inventories, April
  • UK Consumer Price Index, May
  • UK Producer Price Index, May
  June 29, 2016
  • US Personal Income and Outlays, May
  • US Pending Home Sales Index, May
June 15, 2016
  • ice Index – Final Demand, May
  • Eurozone Trade Balance, April
  • UK Labour Market Report, May
  • Bank of Japan Monetary Policy Review
  June 30, 2016
  • US Chicago PMI, June
  • European Central Bank Monetary Policy Minutes
  • Eurozone Consumer Price Index, June
  • UK GDP (Final), Q1 2016
June 16, 2016
  • US FOMC Meeting Announcement & Forecasts
  •  US Consumer Price Index, May
  • US Philadelphia Fed Business Outlook Survey, June
  • US Housing Market Index, June
  • US Treasury International Capital, April
  • UK Retail Sales, May
  • Eurozone Consumer Price Index, May
  • Eurozone Industrial Production, April
  July 1, 2016
  • US Manufacturing (Mfg.)PMI, June
  • US ISM Mfg. Index, June
  • US Construction Spending, May
  • UK CIPS/PMI Manufacturing Index, June
  • Eurozone Manufacturing PMI, June
  • Eurozone Unemployment Rate, May
  • China’s Manufacturing PMI, June
  • Japan’s Manufacturing PMI, June
  • Japan’s Consumer Price Index, May
  • Japan’s Unemployment Rate, may
  • Japan’s Tankan Survey, Q2 2016
  • India’s Nikkei Manufacturing PMI, June
June 17, 2016
  • US Housing Starts, May
  July 4, 2016
  • Eurozone Producer Price Index, May
June 21, 2016
  • Bank of Japan Monetary Policy Minutes
  • Japan’s All Industry Index, April
  July 5, 2016
  • Eurozone Composite PMI, June
  • China’s Services PMI, June
  • Japan’s Composite PMI, June
  • India’s Nikkei Services PMI, June
June 22, 2016
  • US Existing Home Sales, May
  • US FHFA House Price Index, April
  • Eurozone Economic Sentiment, June
  • Eurozone Consumer Confidence Flash, June
  July 6, 2016
  • US ADP Employment Report, June
  • US International Trade, May
  • US Services PMI, June
June 23, 2016
  • US New Home Sales, May
  • US Manufacturing PMI, June
  • US Chicago Fed National Activity Index, May
  • Eurozone Composite PM, June
  • Japan’s Nikkei Manufacturing PMI, June
  July 7, 2016
  • US FOMC Minutes
  • UK Industrial Production, May
June 24, 2016
  • US Durable Goods Orders, May
  • US University of Michigan's Consumer Sentiment, June
  July 8, 2016
  • US Employment Situation, June
  • UK Trade Balance, May
June 24, 2016
  • US Durable Goods Orders, May
  • US University of Michigan's Consumer Sentiment, June
  July 8, 2016
  • US Employment Situation, June
  • UK Trade Balance, May
June 27, 2016
  • US Services PMI, June
  • US Dallas Fed Mfg Survey, June
  • US International Trade, April
  July 9, 2016
  • RBI’s Third Bi-monthly Monetary Policy Review 2016-17

US Fixed Income Markets - Overview

US treasury prices erased earlier gains to end May nearly flat. The yield of the 10 year benchmark bond settled at 1.83% on May 31 as against 1.82% on April 29. Prices rose earlier in the month as their safe haven appeal was boosted following some weak US economic data, including the ADP employment figures. Global growth concerns, following the release of China’s disappointing manufacturing and services sector data, also sparked bond buying. However prices fell later as crude oil prices strengthened intermittently, and as the US FOMC’s meeting minutes signaled that interest rates in the US could be hiked in June. The release of some upbeat domestic economic data, including retail sales, consumer prices, industrial production, and housing starts in the second half of the month further raised expectation that monetary policy would be tightened, pulling prices down further.

US 10 Year Govt. Bond Yield


Learning Centre– Par, discount, and premium bonds

Par, discount, and premium bonds

You would have often heard financial analysts refer to par bonds, premium bonds, and discount bonds. This note enlightens the reader about the basics of these debt instruments.

Prior to maturity, a discount bond trades at a price less than its face value. Thus, an investor who purchases a discount bond earns a return both from coupons received, as well as from receiving a face value greater than the price paid for the bond. For a discount bond, the yield to maturity exceeds its coupon rate. Discount bonds are said to be trading below par.

For bonds trading at a premium to face value, the higher returns earned from coupon payments is offset by receiving a face value less than the purchase price for the paper. Thus for premium bonds, the yield to maturity is less than the coupon rate. Premium bonds are said to be trading above par,

When the paper is trading at a price equal to its face value, it is said to be trading at par. For a par bond, the coupon rate is equal to its yield to maturity.

Traded price relative to face value Type of bond Relationship between coupon rate and maturity
Greater than face value Premium or above par Coupon rate > Yield to maturity
Equal to face value Par bond Coupon rate = Yield to maturity
Less than face value Discount or below par Coupon rate < Yield to maturity


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