Weekly Macro Data Coverage March 09, 2020

Key Highlights:

  • Liquidity in the overall banking system has increased to Rs. 1.87 lakh crore during the fourth week of February 2020
  • During this week, RBI has infused Rs. 25,000 crore under long term liquidity management
  • 10-year Indian sovereign yield remains stable at 6.65% during the reference week
  • Indian rupee hits new low of 73.56 on March 04, 2020 as the fast spreading of COVID-19 virus in India creates panic amongst investors.
  • Bank of England has trimmed the policy rate by 25 bps

Liquidity

Liquidity in the overall banking system has increased to Rs. 1.87 lakh crore during the fourth week of February 2020. With 4.96%, the call money rate (weighted average) remains flat on the lower side of the policy corridor. During this week, RBI has also infused Rs. 25,000 crore under the long term liquidity management scheme. However, as the spreading of COVID-19 has spooked the market, the emerging market including India has been under pressure of capital outflows. This would drain liquidity in the domestic market in some extent.

Capital Market

In the capital market, the 10-year Indian sovereign yield remains stable at 6.65% during the reference week. The long-term yield has come down from 6.86% after the revised liquidity management framework in Feb 6, 2020. However, the Indian sovereign yield is not in line with the US sovereign yield. In the global market, fast spreading COVID-19 virus has created economic uncertainty globally. This leads to demand for safe-haven assets such as US sovereign yield. Therefore, 10-year US sovereign yield has eased to 0.77% during the end of February 2020. We note that the yield was 1.59% during the first week of the month.

Currency Trend

In the currency market, being under selling pressure emerging market currencies including INR has been losing ground to the USD. The Indian rupee hits new low of 73.56 on March 04, 2020 as the fast spreading of COVID-19 virus in India creates panic amongst investors. However, we believe that with the normalization of the situation, the Indian rupee will bounce back. As a major event in the currency market, in an emergency move, the Bank of England has trimmed the policy rate by 25 bps. Going ahead, in order to bring positive sentiment in the market, other major central banks are expected to follow the path with rate cut or QE. This is expected to create favourable condition to for the EM currencies regain their position.

Interest rates and ratio:

Interest Rate

Mar.,01

Jan.,31

Feb.,07

Feb.,14

Feb.,21

Feb.,28

2019

2020

2020

2020

2020

2020

  Policy Repo Rate

6.25

5.15

5.15

5.15

5.15

5.15

  Call Money Rate (WA)

6.22

4.94

4.97

4.99

4.97

4.96

  364-Day Treasury Bill Yield

6.55

5.29

5.32

5.24

5.20

5.16

  2-Yr Indian G-Sec

6.66

5.61

5.56

5.53

5.49

5.25

  10-Yr Indian G-Sec

7.37

6.86

6.70

6.62

6.67

6.65

  10-Yr US G-Sec

 

1.58

1.59

1.47

1.16

0.77

  AAA (Indian corporate)

8.71

7.63

7.54

7.23

7.20

7.25

  Spread in bps (10Yr Indian- US)

737

528

511

515

551

588

  Credit/Deposit Ratio

77.84

75.84

-

75.87

-

-

  USD LIBOR (3 month)

2.3828

1.5688

1.5720

1.5761

1.5702

1.5677

  Forward Premia of US$ 1-month

5.16

3.52

3.20

3.19

3.35

3.82

  US$ 3-month

4.57

4.25

3.82

3.64

3.74

3.93

  US$ 6-month

4.26

4.21

3.85

3.68

3.77

3.91
Source: RBI, Investing.com


Deposit (In Rs. Lakh cr)

Bank Credit (In Rs. Lakh cr)

  As on Feb 14,2020

132.36 

100.42 

  As on Jan 17,2020

131.27 

100.04 

  As on Feb 15,2019

121.19 

94.40 

  YTD (% change)

0.83% 

0.38% 

  YoY (% change)

9.21% 

6.37% 
Source: RBI


Money Market Performance

Commercial Paper (Fortnight)

Outstanding (In Rs. Billion)

Amount issued (In Rs. Billion)

  15-Feb-20

4,358.03 

843.56 

  31-Jan-20

4,219.89 

726.74 

  15-Feb-19

5,242.30 

1035.5 

  % Change (MoM)

3.27% 

16.07% 

  % Change (YoY)

-16.87% 

-18.54% 

Source: RBI