Weekly Macro Data Coverage Oct 07, 2019

Key Highlights:

  • Spread between over-night lending rate and repo rate has further increased to nine bps during the 4th week of September 2019
  • Surplus liquidity in the banking system stands at Rs. 1.35 lakh crore, week ended 4th October
  • The incremental Credit-Deposit ratio continues to be negative since July 2019
  • Spread between 10-year Indian and US sovereign bond reached a high of 532 bps, which was around 480 bps a few months ago
  • Indian rupee has also been appreciating against the USD for the past three weeks and reached 70.9 during the first week of October 2019
  • The forward premia for 1-month has improved by almost 42 bps over a week on as a result of fall in interest rate differential and increase in FII inflows

Liquidity

The spread between over-night lending rate and repo rate has further increased to nine bps during the 4th week of September 2019. The surplus liquidity in the banking system stands at Rs. 1.35 lakh crore. Liquidity is mounting in the system as credit offtake has been impaired. The incremental Credit-Deposit ratio continues to be negative since July 2019. This financial year (until August), RBI has trimmed policy rate by 85 bps however weighted average lending rate on fresh lending has moderated by just 8 bps. Ironically, the lending rate on outstanding loan has gone up by 10 bps during the same time frame.

Capital Market

On the global capital market front, the 10-year US sovereign yields are on a downward roll for past three weeks. It is known that the FOMC has cut the fed fund rate by 25 bps in September. In the domestic market, 10-year Indian sovereign bond is yielding 6.85%. Consequently, the spread between 10-year Indian and US sovereign bond reached 532 bps, which was around 480 bps a few months ago. The higher spread is on account of higher government borrowings.   

Currency Trend

In the global currency market, the emerging market currencies are strengthening against the US dollar. With the Fed’s accommodative monetary policy, yield chasing capital inflows to emerging market have been increasing. Therefore, Indian rupee has also been appreciating against the USD for the past three weeks and reached 70.9 during the first week of October 2019. The forward premia for 1-month has improved by 42bps is a result of fall in interest rate differential and increase in FII inflows.

Interest rates and ratio:

Interest Rate

Sep 28

Aug 30

Sep 06

Sep 13

Sep 20

Sep 27

2018

2019

2019

2019

2019

2019

Policy Repo Rate

6.50

5.40

5.40

5.40

5.40

5.40

Call Money Rate (WA)

6.49

5.36

5.34

5.31

5.36

5.31

364-Day Treasury Bill Yield

7.73

5.72

5.69

5.65

5.60

5.60

2-Yr Indian G-Sec

7.80

5.78

5.77

5.73

5.91

5.78

10-Yr Indian G-Sec

8.00

6.70

6.73

6.77

6.91

6.85

10-Yr US G-Sec

3.23

1.56

1.90

1.72

1.69

1.53

AAA (Indian corporate)

9.07

7.70

8.01

7.85

7.70

7.84

Spread in bps (10Yr Indian- US)

476.7

514

483

505

522.3

532

Credit/Deposit Ratio

76.12

75.74

-

76.25

-

-

USD LIBOR (3 month)

2.1739

2.0866

2.0976

2.0883

2.1549

1.8299

Forward Premia of US$ 1-month

4.96

3.85

4.18

4.57

4.40

3.98

                                 US$ 3-month

4.58

4.18

4.24

4.43

4.17

3.95

                                 US$ 6-month

4.36

4.24

4.28

4.48

4.38

4.23

Source: RBI, Investing.com


Acuité Portfolio Debt Instrument Benchmark Estimates (as on Oct, 10 2019):

Category

10-Yr Corporate Yield to Maturity

AAA*

NA

AA+

8.17%

AA

8.63%

Source: Acuité Research; # Discount Factor: 0.0508; *Outside Benchmark

 

Deposit (In Rs. Lakh cr)

Bank Credit (In Rs. Lakh cr)

As on Sep 13,2019

127.23

97.01

As on Aug 16,2019

126.80

96.83

As on Sep 14,2018

115.6

87.98

YTD (% change)

0.34%

0.19%

YoY (% change)

10.0%

10.26%

Source: RBI


Money Market Performance

Commercial Paper (Fortnight):

Outstanding (In Rs. Billion)

Amount issued (In Rs. Billion)

30-Jun-19

5,039.40

1076.9

15-Jun-19

5,561.80

1078.7

30-Jun-18

4,918.30

1267.3

% Change (MoM)

-9.39%

-0.17%

% Change (YoY)

2.46%

-15.02%

Source: RBI


Indices

 

28-Sep-18

06-Sep-19

13-Sep-19

20-Sep-19

27-Sep-19

NSE Index

10,930.45

10,946.20

11,075.90

11,274.20

11,512.40

NSE Index Return

-1.91

-0.7

1.18

1.79

2.11

BSE Index

36,227.14

36,981.77

37,384.99

38,014.62

38,822.57

BSE Index Return

-1.67

-0.94

1.09

1.68

2.13



Liquidity Operation by RBI:


Source: RBI, Acuité Research;

Note: Net injection (+) and Net absorption (-)

 

Corporate debt (in Rs. Lakh Cr):




Net Debt Issuance by Centre and State Government (Rs. Billion):


Source: Acuité Research, RBI



Commodity Price Index (3 Month Moving Average):






Commodity Price Movement (3 Month Moving Average):






USD-INR Movement:


Source: RBI, Acuité Research

Birabrata Panda

Sr. Statistician/Economist