Key Highlights:
Liquidity
The weighted average call money rate (WACR) on a downward trajectory for past four weeks has reached 5.80% during the first week of June 2019. A downward trend in interbank lending rate is indicating a healthy liquidity condition in the banking sector. During the same week, RBI has trimmed its policy rate for LAF by 25bps to 5.75%. In order to adjust with the new benchmark rate, the call money rate will further decline to below 5.75%. On a positive note, deposit has been growing at 10.25% in May, 2019. Credit offtake, on the other hand, stands at 12.7%. Improvement in deposit growth as compared to offtake will be crucial in monetary transmission view point.
Capital Market
On the global capital market front, the 10-year US sovereign yield has been declining for past four weeks. The yield has reached close to 2% by end of May, 2019. On the domestic capital market perspective, the 10-year Indian G-Sec yield on the similar trend and reached close to 7%. The factors attributing to the softening bond yield are lower oil price, fall in central government’s net debt issuances and higher demand for Indian sovereign bond.
Currency Trend
On the currency market side, the emerging market currencies are strengthening against the US Dollar. As the US 10-year sovereign yield has reached close to 2%, the yield chasing capitals are flowing to the emerging markets. Similarly, with a weak economic outlook, the investors are expecting a shift in the Fed’s stance on monetary policy.
Interest rates and ratio:
Interest Rate |
June, 8 |
May,10 |
May,17 |
May,24 |
May,31 |
June,7 |
2018 |
2019 |
2019 |
2019 |
2019 |
2019 |
|
Policy Repo Rate |
6.25 |
6.00 |
6.00 |
6.00 |
6.00 |
5.75 |
Call Money Rate (WA) |
5.95 |
5.95 |
5.95 |
5.93 |
5.90 |
5.81 |
364-Day Treasury Bill Yield |
6.99 |
6.54 |
6.47 |
6.41 |
6.30 |
6.19 |
2-Yr Indian G-Sec |
7.53 |
6.59 |
6.50 |
6.40 |
6.27 |
6.21 |
10-Yr Indian G-Sec |
7.95 |
7.46 |
7.41 |
7.27 |
7.07 |
7.04 |
10-Yr US G-Sec |
2.92 |
2.39 |
2.32 |
2.13 |
2.08 |
2.08 |
AAA (Indian corporate) |
8.84 |
8.50 |
8.41 |
8.42 |
8.11 |
8.11 |
Spread in bps (10Yr Indian-10 US) |
503 |
507 |
509 |
514 |
499 |
496 |
Credit/Deposit Ratio |
75.33 |
76.90 |
76.99 |
|||
USD LIBOR (3 month) |
1.7144 |
2.3589 |
2.3558 |
2.3563 |
2.3545 |
2.3460 |
Acuité Portfolio Debt Instrument Benchmark Estimates (as on 10 June
2019):
Category |
10-Yr Corporate Yield to Maturity |
AAA* |
NA |
AA+ |
8.04% |
AA |
8.65% |
|
Deposit (In Rs. Lakh Cr) |
Bank Credit (In Rs. Lakh Cr) |
As on May 24, 2019 |
125.17 |
96.23 |
As on Apr 26,2019 |
124.84 |
96.21 |
As on May 25,2018 |
113.53 |
85.38 |
YTD (% change) |
0.26% |
0.02% |
YoY (% change) |
10.25% |
12.71% |
Money Market
Performance
Commercial Paper (Fortnight): |
Outstanding (In Rs. Lakh Cr) |
Amount issued (In Rs. Lakh Cr) |
31-Mar-2019 |
4,830.8 |
1013.0 |
28-Feb-2019 |
5,208.1 |
900.8 |
31-Mar-2018 |
3,725.8 |
999.2 |
% Change (MoM) |
-7.24% |
12.45% |
% Change (YoY) |
29.66% |
1.38% |
Indices
15-Jun-18 |
24-May-19 |
31-May-19 |
07-Jun-19 |
14-Jun-19 |
|
NSE Index |
10,817.00 |
11,844.10 |
11,922.80 |
11,870.65 |
11,823.00 |
NSE Index Return |
0.46 |
3.83 |
0.66 |
-0.44 |
-0.40 |
BSE Index |
35,622.14 |
39,434.72 |
39,714.20 |
39,615.90 |
39,452.07 |
BSE Index Return |
0.50 |
3.96 |
0.71 |
-0.25 |
-0.41 |
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)
Commodity Price Index (3 Month Moving Average)
Commodity Price Movement (3 Month Moving Average)
USD-INR Movement
Source: RBI, Acuité Research