Weekly Macro Data Coverage March 11, 2019

Key Highlights:

  • The Repo – WACR differential turned positive (+3 bps) during last week of February, 2019
  • RBI has infused Rs. 37,500 crore through OMO operation to improve liquidity in the system
  • Credit to Deposit ratio also stands at 77.58% in first fortnight of February, 2019
  • 10-year Indian G-Sec bond yield has further reduced to 7.37% during last week of February, 2019
  • 10-year US G-Sec yield stands at 2.64% during last week of February, 2019
  • INR has appreciated to 70.39 against the USD during first week of March, 2019, the currency pair was trading at 70.98 a week earlier.
  • Indian rupee has been appreciating against the US dollar for past three weeks

Liquidity

With 3 bps, the Repo – WACR differential turned positive during last week of February, 2019. The spread was in negative trajectory for a long duration of three weeks. However, the tight liquidity condition seems to be fading out with series of OMO operation. RBI has infused Rs. 37,500 crore through OMO operation to improve liquidity in the system during past thirty days. The reason behind banking sector’s tight liquidity condition in recent weeks continues to be faster growth in credit (14.35%) as compared to deposits (10.15%). As a result, the Credit to Deposit ratio has reached 77.58% in first fortnight of February, 2019. This was recorded at 74.61%, a year earlier. With the higher C-D ratio, the commercial banks are forced to raise money from the market at a higher rate.

Capital Market:

In the domestic capital market, the 10-year Indian G-Sec bond yield has further decelerated to 7.37% during last week of February, 2019. Currently, the bond yield momentum has been supressed by the OMO operations. From the US market perspective, the 10-year US G-Sec yield stands at 2.64% during last week of February, 2019. The global benchmark yield has reduced by 12 bps within a week. The fall in 10-year US G-Sec yield is a result of lower than expected debt supply by the US government. The precedent being the country’s $9 billion surplus budget in January, 2019 as against a deficit of (-) $28 billion a year earlier.

Currency Trend:

Indian rupee has been performing well among its emerging market currency peers. The INR has appreciated to 70.39 against the USD during first week of March, 2019, the currency pair was trading at 70.98 a week earlier. The Indian rupee has been actually appreciating against the US dollar for past three weeks. Softening commodity prices including that of crude oil in the global market has clutched India’s trade deficit – positively impacting the Indian rupee. Moreover, with the stability in global financial market, FII/ FPI inflow has turned positive. We believe that the strong macro fundamentals will continue to act as a buffer for the Indian rupee.

Interest rates and ratio:

Interest Rate Mar.,02 2018 Feb.,01 2019 Feb.,08 2019 Feb.,15 2019 Feb.,22 2018 Mar.,01 2019
Policy Repo Rate 6.00 6.50 6.25 6.25 6.25 6.25
Call Money Rate (WA) 5.93 6.40 6.39 6.26 6.29 6.22
364-Day Treasury Bill Yield 6.66 6.78 6.78 6.51 6.53 6.55
2-Yr Indian G-Sec 6.90 6.80 6.75 6.80 6.67 6.64
10-Yr Indian G-Sec 7.76 7.38 7.34 7.58 7.42 7.37
10-Yr US G-Sec 2.86 2.63 2.66 2.68 2.76 2.64
Spread in bps (10Yr Indian-10Yr US) 490 475 468 490 466 473
AAA Indian Corporate 8.21 8.67 8.70 8.78 8.32 8.61
AA Indian Corporate 8.18 - - - - 8.56
Spread AAA to10 YR Indian bond 45 129 136 120 90 124
Credit/Deposit Ratio 74.61 77.79 - 77.58 - -
USD LIBOR (3 month) 2.32 - - 2.68 2.59 2.59
Source: RBI; CMIE; Investing.com


Acuité Portfolio Debt Instrument Benchmark Estimates (as on 25th Feb 2019):

Category

10-Yr Corporate Yield to Maturity

AAA*

8.32%

AA+

8.39%

AA

8.85%

Source: Acuité Research; # Discount Factor: 0.0625; *Outside Benchmark

Deposit (In Rs. Lakh cr) Bank Credit (In Rs. Lakh cr)
As on Feb 15, 2019 1,21,211.8 94,034.9
As on Feb 01, 2019 1,21,227.6 94,298.5
As on Feb 16, 2018 1,10,022.7 82,232.1
YTD (% change) -0.01% -0.28%
YoY (% change) 10.17% 14.35%

Source: RBI

Money Market Performance

Commercial Paper (Fortnight): Outstanding (In Rs. Lakh cr) Amount issued (In Rs. Lakh cr)
28-Feb-2019 5,208.1 900.8
15-Feb-2019 5,242.3 1,035.5
15-Feb-2018 4886.3 1037.7
% Change (MoM) -0.65% -13.01%
% Change (YoY) 6.59% -13.19%

Source: RBI

Indices

08-Mar-18 15-Feb-19 22-Feb-19 01-Mar-19 08-Mar-19
NSE Index 10,113.70 10,724.40 10,789.85 10,863.50 11,035.40
NSE Index Return -3.61 -0.2 0.51 0.66 -0.21
BSE Index 32,968.68 35,808.95 35,871.48 36,063.81 36,671.43
BSE Index Return -3.56 -0.19 -0.07 0.55 -0.15


Liquidity Operation by RBI:

 

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

Net Debt Issuance by Centre and State Government:


Source: Acuité Research, RBI

Commodity Price Index (3 Month Moving Average):

Commodity Price Movement (3 Month Moving Average):

Corporate debt (in Rs. Lakh Cr):

USD-INR Movement:

Source: RBI, Acuité Research