December 2013 | srei
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December 2013

December, 2013

Highlights of RBI’s Mid-Quarter Monetary Policy Review (December 2013)

  • The Reserve Bank of India (RBI) leaves the policy repo rate under the liquidity adjustment facility (LAF) unchanged at 7.75%.
  • Consequently, the reverse repo rate under the LAF remains unchanged at 6.75%, and the marginal standing facility (MSF) and the bank rates at 8.75%.
  • Decides to keep the cash reserve ratio (CRR) unchanged at 4%.
  • The RBI’s rationale behind keeping the interest rate unchanged was potential easing of vegetable prices and concerns about a weak domestic economy.
  • The RBI has, however, said that if the expected easing of inflation does not materialise, it will resume its policy action, even on off-policy dates if required.

Indian Economy Review

Indian government optimistic on India’s growth recovery in current fiscal

The Indian government remains optimistic that economic growth in the country will recover, with finance Minister P Chidambaram saying India will clock a growth rate of 5% in this fiscal, the current stress notwithstanding. The RBI too expects economic growth to improve in the second half of this financial year on the back of expansion in the agriculture sector, exports and movement in stalled projects. However, major international agencies are pegging their estimates on the lower side, with the Asian Development Bank (ADB) expecting India to record 4.7% growth in the current fiscal, and 5.7% next year.

Government positive on meeting fiscal target

Mr. Chidambaram said that the government will stick to the fiscal deficit target of 4.8% of GDP for 2013-14. He added that the government will not compromise on any effort to contain fiscal deficit and consolidation will continue so that the gap is contained at 3% of the GDP by 2016-17. The Ministry of Finance (MoF) expects to save on both plan and non-plan expenditure in the current fiscal to contain the fiscal deficit within the target of 4.8% of GDP.

Domestic GDP Growth

Domestic GDP Growth

Government, RBI confident of fall in inflation despite spike in inflation

India's headline inflation rate, based on the Wholesale Price Index (WPI), rose to a 14-month high of 7.52% in November from 7% in the previous month mainly on account of a sharp increase in prices of food articles. India’s Consumer Price Index (CPI) (combined) inflation for November also showed a sharp uptick to a life-time high of 11.24% from 10.17% a month ago. However, Prime Minister’s Economic Advisory Council (PMEAC) Chairman Mr Rangarajan said that a fall in vegetable prices is likely to ease headline inflation and retail inflation to 6.5% and 9.2%, respectively, in December. Meanwhile, the RBI kept it interest rates unchanged at its policy review held in December due to potential easing of vegetable prices (which could keep inflation down) and a weak economy.

Other major developments in the month

Lok Sabha approved the government’s proposal to spend over Rs 70,759 cr in the current fiscal on works such as railway electrification, establishment of workshop to manufacture bogies and several over-bridges. The Parliament approved the government’s plan to spend an extra Rs 18,594 cr in FY14 mainly on the back of additional subsidies. The union cabinet approved the guidelines for providing interest-free loans worth Rs 6,600 cr to sugar companies. The Foreign Investment Promotion Board approved Tesco Plc's proposal to acquire 50% stake in the Tata Group-promoted Trent Hypermarket and Vodafone’s proposal to invest Rs 10,141 cr in its Indian arm.

The MoF asked financial institutions to provide more credit to farmers in view of good monsoon and it may increase the budget amount for the farm sector. It also granted Rs 10,000 cr under special banking arrangement (SBA) as sought by the Department of Fertiliser to help the industry tide over the liquidity crunch. The MoF directed public sector banks to recover - by the end of this financial year - at least 10% of loans that have gone bad. It asked them to switch to the broker model from the existing corporate agency structure for distribution of insurance products.

Telecom-related developments

The MoF cleared a proposal that will make it mandatory for mobile handset makers to provide an SOS key directly connecting the caller to the police control room. A panel of ministers approved key changes to the rules on mergers and acquisitions in the telecom industry, raising the cap on the market share of a merged entity in a circle to 50%. The cabinet approved the decision forwarded by the Empowered Group of Ministers (EGoM) on spectrum price for 1800MHz and 900MHz bands. The Department of Telecom (DoT), in an amendment to the Notice Inviting Application, postponed the start of spectrum auction to February 3 from January 23. DoT also decided to bar operators holding 3G airwaves from sharing the high-speed spectrum. Further, it amended the unified telecom licence to do away with the clause which operators claimed mandated forced migration to the new regime. TRAI mandated cable TV companies to give users pre and post-payment options. It also relaxed penalty norms under which it will impose fine on telecom operators based on a new slab instead of levying Rs 5000 fine on every pesky call and SMS complaint received.

Key regulatory developments

RBI said that investment by an individual in a credit information company cannot exceed 10% of its equity capital. The central bank also removed the ceiling on loan disbursal to individuals under the General Credit Card scheme with immediate effect. Further, it allowed holding companies to raise funds through external commercial borrowings under automatic and approval-based routes, as long as they are for special purpose vehicles formed for an infrastructure project.

The Competition Commission of India imposed a penalty of Rs 1,773 cr on Coal India and its subsidiaries for abusing their dominant position as suppliers of non-coking coal to power producers. It also issued notices to 18 sugar companies after a probe into the industry and state-run oil marketing firms for alleged rigging of bids for ethanol purchase.

The Income Tax Department issued a demand notice of Rs 3,700 cr against Vodafone’s Indian arm, in a transfer pricing case; later on however, the Income Tax Appellate Tribunal stayed the tax demand. The Delhi High Court allowed Nokia Corp to sell its Chennai factory to Microsoft Corp, asking income-tax authorities to revoke the freeze on the company’s assets; also asked the company to park a minimum of Rs 2,250 cr in an escrow account as a safeguard to lessen the fears of the tax department.

Indicators Current Previous
Monthly WPI Inflation 7.52% (November 2013) 7.00% (October 2013)
Industrial Growth -1.8% (October 2013) 2.0% (September 2013)
Exports $203.99 bn (April-November 2013) $191.96 bn (April-November 2012)
Imports $303.89 bn (April-November 2013) $321.19 bn (April-November 2012)
Trade Deficit -$99.90 bn ( April-November 2013) -$129.23 bn ( April-November 2012)
Gross tax collection Rs 5,97,049 cr (April-November 2013) Rs 5,44,473 cr (April-November 2012)


 IIP Growth

  • India’s industrial production contracted to 1.8% in October, first contraction in four months, as compared with revised 1.96% growth in September and 8.4% growth a year ago.
  • India is expected to soon have a seasonally adjusted national account and industrial production numbers along the lines of developed countries.

Core IIP Growth

Core IIP Growth

  • The output of India's key core infrastructure industries expanded by 1.7% in November compared with a 0.6% contraction a month ago.

Fiscal Deficit

Fiscal Deficit

  • India's fiscal deficit touched Rs 5.1 lakh cr during April-November or 93.9% of the full-year budget target.

Other major economic indicators released in December

  • India's trade deficit narrowed to $9.22 bn in November from $17.20 bn a year ago, and $10.56 bn in October, as imports declined 16.4% year-on-year to $33.83 bn, while exports rose 5.9% to $24.61 bn.
  • India's external debt declined to $400.3 bn at the end of September from $400.6 bn a quarter ago.
  • The Indian government's tax collections in April-November rose 9.7% year-on-year to Rs 5.97 lakh cr.
  • India's HSBC manufacturing Purchasing Managers' Index rose to an eight-month high at 51.3 in November from 49.6 in October, while Purchasing Managers Index for the services industry rose slightly to 47.2 in November from 47.1 in October.
  • The CII Business Confidence Index for October-December surged to a six-quarter high at 54.9 from 45.7 recorded in July-September, reflecting a pick-up in the economy.

Global Economy Review

Global economy on recovery path

Global economy, derailed since the 2008 financial crisis, seems to be gaining traction due to improvement in developed economies. The Organization of Economic Cooperation and Development (OECD) said that the outlook for most major economies has improved with the Eurozone economy gathering momentum as its debt crisis subsides. OECD’s leading indicator, which is designed to anticipate turning points in economic activity relative to trend, moved up 0.07% month-on-month to 100.7 in October. Meanwhile, in an important development, the World Trade Organisation (WTO) reached a historic deal after all 160 members agreed to a package of measures which is expected to boost global trade by $1 trillion through standard custom procedures and allow developing countries to provide subsidised food to the poor.

World GDP Growth

Major Indicators Current Previous Major Global Central Bank Major Global Central Bank
US GDP 4.1% Q3 2013 2.5% Q2 2013 US Fed Funds Rate 0-0.25%
US unemployment 7% November 2013 7.3% October 2013 Bank of England 0.50%
UK GDP 0.8% Q3 2013 0.8% Q2 2013 European Central Bank 0.25%
Euro Zone GDP 0.1% Q3 2013 0.3% Q2 2013 Japan Benchmark Rate 0-0.10%
Japan GDP 3.8% Q2 2013 3.8% Q1 2013    
China GDP 7.8% Q3 2013 7.5% Q2 2013    
Singapore’s GDP -2.7% (YoY) Q3 2013 2.2% (YoY) Q3 2013    

US Fed finally decides to taper stimulus

After nearly seven months since the US Federal Reserve (Fed) first hinted at pulling back its stimulus measures, it has finally decided to taper its liquidity easing measures on the back of signs of strong recovery in its domestic economy. The Fed, at its December meeting, announced it will trim its $85 bn a month bond purchases by $10 bn starting in January 2014, and will make similar cuts if economic gains continue. The latest economic data showed that US GDP grew at a revised rate of 4.1% in Q3 2013 as compared with an initial estimate of 3.6%. The job sector also saw continuous improvement with the jobless rate dropping to a five-year low of 7% in November. The Fed, however, said that it will hold its key short-term rate near zero until the unemployment rate falls below 6.5%.

Among important developments during the month, the US lawmakers unveiled a budget deal for the next two years that will avert another government shutdown in January 2014. The US finalised the Volcker rule seeking to ensure that banks cannot make speculative trades that are so large and risky that they threaten individual firms or the wider financial system.

Key US economic indicators

  • Budget deficit for November totalled $135 bn, down 21% from the $172 bn gap recorded in the same month a year earlier.
  • Current account deficit (CAD) narrowed to $94.8 bn in Q3 2013, lower than the downwardly revised $96.6 bn in Q2.
  • Trade deficit narrowed to $40.6 bn in October from a revised $43.0 bn in September.
  • Retail sales rose 0.3% in February following a revised 0.6% decline in January.
  • The US added 192,000 jobs in March compared with an upwardly revised 197,000 in February; the unemployment rate remains unchanged at 6.7% in the month.
  • On the housing front, new home sales fell 3.3% to a seasonally adjusted annual rate of 440,000 in February following a downwardly revised 455,000 in January while pending home sales dropped by a seasonally adjusted 0.8% in February following a downwardly revised decline of 0.2% in January.


Eurozone gets ready to battle deflation

European Central Bank’s (ECB) President Mario Draghi said that the central bank has been preparing additional policy steps to guard against deflation as the strong euro weighs on prices. Expectations of radical action by the ECB to combat the threat of deflation strengthened further after the region’s CPI inflation rate fell to its lowest level since November 2009 at 0.5% in March, down from 0.7% in February. Meanwhile, GDP of the bloc grew by 0.3% in Q4 2013 compared with 0.1% growth in Q3.

Key Eurozone economic indicators:

  • Eurozone’s trade surplus came in at 900 mn euros in January compared with a 13.8 bn euro surplus in December.
  • Industrial production fell 0.2% in January after a drop of 0.4% in December.
  • Retail sales increased by a seasonally adjusted 1.6% in January following a fall of 1.3% in December.
  • The Manufacturing Purchasing Managers’ Index (PMI) fell to a three-month low of 53.0 in March following a final reading of 53.2 in February.

The UK’s 2013 GDP growth revised to 1.7%

The UK’s GDP growth rate for overall 2013 was revised to 1.7% from the earlier estimate of 1.8% while the economy grew 0.7% in Q4 2013, unchanged from its previous estimate. Inflation fell to its lowest annual rate for more than four years at 1.7% in February (vs 1.9% in January). The Bank of England (BoE) / GfK Inflation Expectations Survey in February showed inflation expectations for the coming year are at 2.8% (the lowest level since February 2010) compared with 3.6% in November 2013. Meanwhile, the BoE continued to keep the bank rate unchanged at 0.5% and asset purchases at 375 bn pounds.

Key UK economic indicators:

  • Public borrowing was 9.3 bn pounds in February compared with 9.2 bn pounds in the same month last year.
  • The visible trade shortfall increased to 9.8 bn pounds in January from 7.7 bn pounds in December.
  • Industrial production rose 0.1% in January, slowing from a 0.5% growth rate in the prior month.
  • Retail sales rose 1.7% in February following a 2% fall in January.
  • Jobless claims fell 34,600 in February following a fall of 33,900 claims in January.
  • Jobless claims fell 34,600 in February following a fall of 33,900 claims in January.


Asia’s economic growth dependent on China

The Asian Development Bank (ADB), in its Asian Development Outlook 2014, said that growth in the developing countries of Asia will show stronger growth over the next two years but this will be dependent on China's ability to smoothly contain internal credit growth as well as the expected continued recovery of major industrialised countries.

China’s economic growth loses steam

Fear of the world’s fastest growing economy – China – losing steam aggravated following weak economic indicators (falling exports, slowing industrial production and easing Manufacturing Purchasing Managers Index in February). The Asian Development Bank said that China's economic growth will slow to 7.5% in 2014 and 7.4% in 2015 as compared with 7.7% growth seen in 2013. Meanwhile, China’s Central Bank Governor Zhou Xiaochuan said that the country expects to fully liberalise interest rates on bank deposits within two years.

Key Chinese economic indicators:

  • The country’s exports fell 18.1% (annually) in February following a 10.6% jump in January. Imports rose 10.1% in February, almost same as the previous month, thereby resulting in a trade deficit of $23 bn in February versus a surplus of $32 bn in January.
  • Industrial production slowed to 8.6% in January-February, the lowest since 7.3% growth in April 2009, compared with 9.7% in December.
  • Industrial output rose 1.1% in November following a revised 0.1% in October.
  • Consumer Price Index inflation was unchanged in November after edging down by 0.1% in October.
  • In housing indicators, new home sales jumped 25.4% to a seasonally adjusted annual rate of 444,000 in October after sliding 6.6% to 354,000 in September while the pending home sales index inched up 0.2% to 101.7 in November from a downwardly revised 101.5 in October.


Eurozone’s economy remains fragile

A debt-laden Eurozone has managed to pull out its economy from a recession but growth momentum remains fragile. Eurozone’s GDP expanded 0.1% quarter-on-quarter in Q3 2013 following a Q2 growth of 0.3%. European Central Bank (ECB) President Mario Draghi kept the benchmark interest rate at a record low of 0.25% citing subdued economic recovery and said that the central bank is ready to act if necessary to boost a poor performing economy. Among other major announcements, European Commission said that the credit rating of the European Union should be assessed on its own merits due to the special treaty based status of the EU budget.

Key Eurozone economic indicators:

  • Trade surplus widened to 17.2 bn euros in October from 14.3 bn euros in September.
  • Industrial production fell a seasonally adjusted 1.1% month-on-month in October, after dropping an upwardly revised 0.2% in the previous month.
  • CPI inflation rose 0.9% in November from a year earlier compared with a 0.7% increase in October.
  • Retail sales decreased 0.2% month-on-month in October, following a 0.6% fall in September.

UK’s GDP growth prospects positive

The UK confirmed a steady recovery by raising its Q3 GDP growth by 0.4% to 1.9% (annual) from the earlier estimate of 1.5% and as compared with 1.3% in Q2. On a quarterly basis, the GDP grew 0.8% in Q3 following revised 0.8% in Q2. The National Institute of Economic and Social Research (NIESR) said that the UK economy expanded 0.8% during three months to November following the 0.7% increase seen during three months ended October. The UK’s Office for Budget Responsibility revised its economic growth projections for 2013 to 1.4% from 0.6% and for 2014 to 2.4% from 1.8%. Meanwhile, the Bank of England held its key interest rate at a record low at 0.5%.

Key UK economic indicators

    • The current account gap widened to 20.7 bn pounds in the third quarter from a revised 6.2 bn pounds in the second quarter.
    • The visible trade gap narrowed to 9.7 bn pounds in October from 10.1 bn pounds in September.
    • The claimant count fell slightly to 3.8% in November from 3.9% in October; the number of people claiming jobseeker's allowance fell by 36,700 to 1.27 mn.
    • The jobless rate came in at 7.4% in the August-October period, down 0.3 percentage points from May to July.
    • Industrial production grew 0.4% in October following 0.9% rise in September.
    • Retail sales rose 0.3% in November following a revised 0.9% fall in October.
    • CPI inflation slowed to 2.1% in November, the lowest since the same month in 2009, as compared with 2.2% in the previous month.


Outlook of Asian economies improves

The Asian Development Bank (ADB) maintained 2013 growth at 6% and 2014 growth at 6.2% for the 45-member developing Asian nations, citing improving outlooks in Japan and the US, paired with stronger-than-expected performance in China.

Japan persists with its stimulus measures

Japanese Prime Minister Shinzo Abe's cabinet approved a $182 bn package to pull the economy out of deflation. He also approved an extra budget of $53 bn to fund stimulus measures. The Bank of Japan (BoJ) retained its monetary easing plan in December as the economy continued with its moderate recovery and consumer prices maintained an upward trend. The BoJ’s meeting minutes stated that the policymakers have agreed on the assessment that the economy is set to continue its moderate recovery, but some did express concern over the slowing pace of growth. The central bank’s monthly report showed that the country’s exports and industrial production are expected to increase moderately in the coming months. BoJ Governor Haruhiko Kuroda said that Japan's inflation is set to stay above 1% during the first half of 2014.

Key Japanese economic indicators

      • Exports rose 18.4% in November following an 18.6% gain in October, while imports rose 21.1% in the year to November, resulting in a trade deficit of 1.29 trillion yen.
      • Industrial production went up by 0.1% in November compared to the previous month, while October saw a gain of 1%.
      • Industrial production went up by 0.1% in November compared to the previous month, while October saw a gain of 1%.
      • Core CPI inflation rose 1.2% in November from a year earlier compared with a 0.9% rise in October.
      • The unemployment rate was 4% in November, unchanged from October.

China expects 2013 GDP to grow higher than target rate

China’s cabinet report showed that economic growth is likely to come in at 7.6% in 2013 as compared with a government target of 7.5%. China's top planning agency National Development and Reform Commission (NDRC) pledged to curb local government debt while the People's Bank of China said that it will keep monetary policy stable in 2014 even as it pushes ahead with financial reforms.

Key Chinese economic indicators

      • Exports rose 12.7% in November compared with a year earlier, while imports increased 5.3%, resulting in a trade surplus of $33.8bn.
      • The annual CPI inflation slowed to 3% in November from an eight-month high of 3.2% in October.
      • Industrial output rose 10% year-on-year in November following 10.3% expansion recorded in October.
      • Retail sales grew 13.7% year-on-year in November following a 13.3% gain in October.

Singapore economy contracts 2.7% in Q4

Singapore’s economy shrank for the first time in five quarters after its manufacturing and services industries weakened. The Q4 GDP contracted 2.7% in Q4 2013 as compared with revised 2.2% growth in the previous quarter. Singapore’s central bank cautioned that though the economy as well as financial markets were resilient in 2013, several downside risks lie ahead. Among key economic indicators, Singapore's non-oil domestic exports plunged 8.8% in November compared with a 2.8% increase in October. Manufacturing output growth slowed to 4% year-on-year in November from 8.3% in October. The CPI inflation increased 2.6% year-on-year in November, faster than a 2% rise in October. Retail sales fell 9.4% in October compared with a year ago; compared with September, retail sales fell 3.2% in October.

Domestic Fixed Income Review

Domestic G-Sec Yield

6 Month LIBOR

Call money rates ended higher in December to end at 8.75-8.85% on the last day of the year as compared with 7.35-7.50% on November 29. In the earlier part of the month, call rates were on the lower side due to comfortable liquidity position in the banking system, subdued demand from banks for funds, spending by the government and inflows from RBI's dollar swap windows. However, later in the month, call money rates went up as banks borrowed funds to meet reserve requirements, and corporate advance tax outflows put pressure on liquidity deficit in the banking system.

Indian government bond prices fell during the month, with the yield on the new 10-year benchmark paper 8.83%, 2023 rising to 8.82% on December 31, compared with 8.74% on November 29, while yield on the erstwhile benchmark 7.16%, 2023 rose to 9.12% on December 31, compared with 9.04% on November 29. Sentiments were hit as fears of a rate hike by the RBI were re-ignited following disappointing WPI and CPI inflation data for November. Bond prices also fell on concerns that the government may conduct debt switch operations in the near future. Prices fell further as the US Fed announced it is going to reduce its bond purchases from January 2014 by $10 bn. Continuous supply of G-secs via weekly auctions also kept up the pressure on gilts during the month.

Further fall in gilt prices was, however, capped as the market cheered the RBI’s decision (taken during its mid-quarter policy review) to keep interest rates unchanged. RBI Governor Raghuram Rajan’s comment that the current status quo announced in the policy meet did not mean a pause in tightening of interest rates, however, disappointed market participants. Intermittent strength in the rupee against the dollar also supported gilt prices.

Other major developments during the month

RBI launched cash-settled interest rate futures contracts for investors to help them hedge interest rate risks while investing in government bonds; SEBI also allowed stock exchanges to introduce cash settled interest rate futures on 10-year government bonds. The central bank, however, barred banks and primary dealers from taking positions on behalf of clients in the interest rates futures market. RBI started issuing Inflation Indexed National Savings Securities-Cumulative (IINSS-C) for retail investors from December 23; the offer is open until March 31. RBI said that the government is likely conduct the proposed Rs 50,000cr gilt buy back or switch in January-March to reduce redemption pressure over the next four years. A Confederation of Indian Industry survey said that the Indian corporate bond market has the potential to reach a level of 15% of GDP during the 12th Five Year Plan. S&P Dow Jones and BSE are expected to soon launch futures trading in 10-year India sovereign bond index.

Banking related developments

RBI released operational guidelines on novation of over-the-counter derivative contracts for banks; the central bank said that a derivative contract between two counter-parties could be transferred to a third party with prior consent from the remaining party. It also proposed fresh norms which will enable lenders to identify stress at an early stage and banks would face increased provisioning for delaying non-performing asset identification. RBI said that banks can pay interest on rupee savings and term deposits for periods shorter than quarterly intervals. The central bank questioned large banks on their failure to raise lending or deposit rates in line with the central bank’s policy moves. It also asked banks to create deferred tax liability on special reserves as a matter of prudence. Further, RBI allowed financially sound and well managed urban co-operative banks to act as PAN service agents.

Fixed Income Indicators

Rates & Liquidity

  31-Dec-13 1 Week Ago 1 Month Ago
Repo 7.75 7.75 7.75
Reverse Repo 6.75 6.75 6.75
LAF o/s Repo (Rscr) 38976 40927 18842
LAF o/s Rev Repo (Rscr) 6625 22 3040

Overnight                                                   Rate(%)

  31-Dec-13 1 Week Ago 1 Month Ago
Mibor 9.07 8.80 7.72
Call 8.85 8.75 7.50
CBLO 8.87 8.76 6.99
OIS 1Y 8.47 8.51 8.45
OIS 5Y 8.43 8.46 8.36

CDs                                                                       Yield(%)

  31-Dec-13 1 Week Ago 1 Month Ago
1-Month 8.75 8.84 8.48
3-Month 9.11 8.70 9.04
6-Month 9.21 9.24 9.29
1-Year 9.28 9.33 9.29

CPs                                                   Yield(%)

  31-Dec-13 1 Week Ago 1 Month Ago
1-Month 9.00 9.09 8.68
3-Month 9.89 9.00 9.44
6-Month 9.92 9.94 10.04
1-Year 9.92 9.95 9.98

Short Term Bonds                                                       Yield(%)

  31-Dec-13 1 Week Ago 1 Month Ago
1 Y G-Sec 8.86 8.97 8.78
1 Y AAA 9.63 9.68 9.65
1 Y AA 10.14 10.19 10.16
2 Y G-Sec 8.51 8.50 8.42
2 Y AAA 9.56 9.57 9.55
2 Y AA 10.05 10.06 10.04

Long Term Bonds                                                   Yield(%)

  31-Dec-13 1 Week Ago 1 Month Ago
5 Y G-Sec 8.93 8.95 8.81
5 Y AAA 9.69 9.73 9.81
5 Y AA 10.34 10.38 10.29
10 Y G-Sec 8.82 8.86 8.74
10 Y AAA 9.64 9.66 9.56
10 Y AA 10.45 10.47 10.37

Top 5 Graded G-Secs                                         Yield(%)

  31-Dec-13 1 Week Ago 1 Month Ago
8.83% CGL 2023 8.82 8.86 8.74
08.12 GS 2020 9.22 9.24 9.11
07.28% CGL 2019 8.93 8.95 8.81
08.28% CGL 2027 9.12 9.13 9.04
08.28% CGL 2027 9.20 9.24 9.07


  31-Dec-13 1 Week Ago 1 Month Ago
USD/INR 61.80


EURO/INR 85.36 85.19 84.98
GBP/INR 102.01 102.17


100 JPY/INR 58.97 58.86 60.97
USD/EURO 0.73 0.72 0.74


10 Year G-Sec Movement
*Note: 10 year benchmark movement represented by 7.16% 2023 bond till December 9th and later represented by 8.83% 2023 bond.


Corporate Bond Yield


Corporate AAA, AA Bond

India Government Borrowings Calendar: April – September 2014

Sr. No. Week of Auction Amount (Rs Cr) Security-wise Allocation
1 January 6-10, 2014 15,000 i) 5-9 Years for Rs 3,000-4,000 cr.
ii) 10-14 Years for Rs 6,000-7,000 cr.
iii) 15-19 Years for Rs 2,000-3,000 cr.
iv) 20 Years & Above for Rs 2,000-3,000 cr.
2 January 13-17, 2014 15,000 i) 5-9 Years for Rs 3,000-4,000 cr.
ii) 10-14 Years for Rs 6,000-7,000 cr.
iii) 15-19 Years for Rs 2,000-3,000 cr.
iv) 20 Years & Above for Rs 2,000-3,000 cr.
3 January 27-31, 2014 15,000 i) 5-9 Years for Rs 3,000-4,000 cr.
ii) 10-14 Years for Rs 6,000-7,000 cr.
iii) 15-19 Years for Rs 2,000-3,000 cr.
iv) 20 Years & Above for Rs 2,000-3,000 cr.
4 February 3-7, 2014 10,000 i) 5-9 Years for Rs 3,000-4,000 cr.
ii) 10-14 Years for Rs 5,000-6,000 cr.
iii) 15-19 Years for Rs 2,000-3,000 cr.
iii) 15-19 Years for Rs 2,000-3,000 cr.

Economic Events Calendar

January 10, 2014
  • US Non-farm payrolls / Unemployment Rate, December
  • India’s Index of Industrial Production, November
January 28, 2014
  • US S&P Case-Shiller HPI, October
  • US Durable Goods Orders, December
  • UK GDP, Q4 2013
  • India’s RBI’s Monetary Policy Review, January
January 13, 2014
  • US Treasury Budget, December
  • Japan’s Trade Balance - BOP Basis, November
  • India’s CPI Combined for Rural / Urban, December
January 29, 2014
  • US FOMC Meeting Announcement
January 14, 2014
  • US Retail Sales. December
  • Euro zone Industrial Production, November
  • UK Consumer Price Index, December
  • India’s WPI inflation, December
January 30, 2014
  • US GDP, Q4 2013
  • US Pending Home Sales Index, December
  • Euro zone Economic Sentiment, January
  • Japan’s Industrial Production, December
  • Japan’s PMI Manufacturing , Jan
January 15, 2014
  • US Producer Price Index, December
  • Euro zone Trade Balance, November
  • Japan’s Machine Tool Orders, December
  • Japan’s Tertiary Industry Index, November
January 31, 2014
  • US Personal Income and Outlays, December
  • US Chicago PMI, January
  • Euro zone Flash Consumer Price Index, December
  • Euro zone Unemployment Rate, December
  • India’s Government finances, December
  • India’s CPI for industrial workers, December
  • India’s Core sector growth for December
  • India’s GDP (revised estimate), 2012-13
January 16, 2014
  • US Consumer Price Index, December
  • US Philadelphia Fed Survey, January
  • US Initial Jobless Claims, January 11
  • European Central Bank Monthly Report
  • Euro-Zone Consumer Price Index, December
  • UK RICS House Price Balance, December
February 3, 2014
  • US ISM Mfg Index, January
  • Euro zone PMI Manufacturing Index, January
  • UK CIPS/PMI Manufacturing Index, January
  • India’s HSBC Manufacturing PMI, January
January 17, 2014
  • US Housing Starts and Building Permits, December
  • US Industrial Production and capacity utilisation, December
  • UK Retail Sales, December
  • India’s Forex Reserves, January 10
February 4, 2014
  • US Factory Orders, December
  • Euro zone Producer Price Index, December
  • UK PMI Construction, December
  • Japan’s PMI Composite, January
January 20, 2014
  • India’s CPI for Rural / Farm labourers, December
February 5, 2014
  • US ISM Non-Mfg Index, January
  • Euro zone PMI Composite, January
  • UK CIPS/PMI Services Index, December
January 22, 2014
  • Bank of England Minutes of Monetary Policy Review, January
  • UK Labour Market Report, December
  • China’s PMI Flash Mfg Index, January
February 6, 2014
  • US International Trade, December
  • ECS Monetary Policy Meeting
  • Bank of England Monetary Policy Meeting
  • India’s Services PMI, January
January 23, 2014
  • US Flash PMI Manufacturing, January
  • Euro zone Flash PMI Composite, January
February 7, 2014
  • UK Industrial Production, December
  • India’s Advance estimate of GDP, 2013-14

US Fixed Income Markets - Overview

US treasuries fell sharply in December with the yield on 10 year benchmark bond rising to 3.03% on December 31 from 2.74% on November 29. The primary factor that dented sentiment for bonds was uncertainty over timings of stimulus tapering by the US Fed. A series of positive economic data – rise in Q3 GDP, fall in November unemployment rate and retail sales – also fuelled speculation that the US Fed could scale back its stimulus program. Losses were further aggravated after the US Fed announced that it will reduce its monthly bond purchase of $85 bn by $10 bn from January 2014. It also said that it will make similar cuts if economic gains continue and plans to hold its key short-term rate near zero until unemployment rate falls below 6.5%. However, further fall in bond prices was capped due to year-end buying, sporadic fall in equities and intermittent weak housing indicators.

US 10 Year Govt. Bond Yield

Learning Centre– Yield Curve

Yield curve is a chart representation (see chart 1) of the relationship between time and yield on securities. The relationship defines the expectation that market participants have regarding the long-term interest-rate movement in the near to long term periods. A yield curve can be positive, neutral or flat.

      • The most common yield curve is a positive yield curve when the yield at the longer end is higher than that at the shorter end of the time axis. This is because people demand higher returns from longer term investments.
      • A neutral yield curve has a zero slope, i.e. is flat across time. This occurs when people are willing to accept more or less the same returns across maturities.
      • The negative yield curve (also called an inverted yield curve) occurs when the long-term yield is lower than the short-term yield. Such instances are rare and can be due to expectations of impending downturn in the economy and people are expecting lower interest rates in the future.

While a standalone yield curve depicts the expectations of market participants at that particular point in time, a better or more popular way of analysing yield curves is to compare with another point in time or period (see chart 2). Market participants can gauge the movement of market participants across the yield curve and different points in time.

Yield Curve Charts

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