Weekly Macro Data Coverage December 03, 2018

Key Takeaways:

  • Liquidity condition in the banking sector remains at a comfortable zone in fourth week of November, 2018
  • Repo WACR differential stands at 8 bps in the 4th week of November
  • Credit to deposit ratio has reached 77.05 as credit (14.9%) is growing much faster than deposit (9.1%)
  • Indian sovereign bond yield has dropped to a three month low of 7.77%
  • Spread between Indian and US 10-year G-Sec bond yield stands at a low of 431 bps
  • Indian rupee continues to appreciate in fourth week of November, 2018.

Liquidity:

The repo WACR differential stands at 8 bps indicates in the 4th week of November. The differential remains close to 10 bps indicates liquidity condition in the banking sector is in the comfortable zone. This is a result of net infusion of Rs. 320 billion by the RBI through OMO operation. Going forward, the Central Bank is likely to infuse another Rs. 400 billion through OMO operation in December, 2018 only. This will further ease the liquidity condition in the market and banking sector will have enough cash to lend. The credit deposit ratio, on the other hand, has exceeded 77. Higher credit demand is also weakening commercial banks liquidity condition.

Capital Market:

During last FOMC meeting, the Fed had indicated that fed rate has almost normalized. Considering pause in the fed rate hike cycle, the sovereign bond yield for most of the countries has been declining. In case of India, the 10 year G-Sec bond yield has dropped to a three month low of 7.77% in 4th week of November. As a result, the spread between Indian and the US 10-year G-Sec bond yield stands at a low of 431 bps. In addition to the FOMC note, country specific factor such as macro-economic stability in India is also boosting investors’ confidence on Indian economy.

Currency Trend:

In last week, among the major currencies, South African Rand, Chinese Yuan, Russian Rubble, and Indian Rupee are highly appreciating against the US dollar. Normalization in global geo-political condition is restoring investors’ confidence on the economic outlook of Emerging Markets including India. We believe that net capital inflows to India are likely to accelerate in the coming months. Positive trend in net capital inflows along with lower crude price will further appreciate the Indian rupee against the US dollar.

Interest rates and ratio

Interest Rate Nov.17, 2017 Oct. 26, 2018 Nov.02, 2018 Nov.10, 2018 Nov.16, 2018 Nov.23, 2018
Policy Repo Rate 6 6.5 6.5 6.5 6.5 6.5
Call Money Rate (WA) 5.86 6.5 6.43 6.43 6.38 6.42
364-Day Treasury Bill Yield 6.29 7.47 7.48 7.42 7.33 7.27
2-Yr Indian G-Sec 6.6 7.44 7.43 7.42 7.35 7.3
10-Yr Indian G-Sec 7.21 7.84 7.84 7.81 7.85 7.77
10-Yr US G-Sec 2.36 3.2 3.18 3.08 3.05 2.99
10Yr Indian bond Spread (in bps) 424 464 466 473 480 431
AAA Indian Corporate 7.63 8.89 8.7 8.67 8.78 8.76
AA Indian Corporate 7.97 8.97 NA NA NA NA
AAA to10 YR Indian bond spread 41 105 86 86 93 99
Credit/Deposit Ratio 73.41 76.75 - 77.05 - -
USD LIBOR 1.69 2.58 2.61 2.64 2.64 2.69

Source: RBI, Investing.com

  Deposit (In Rs. Lakh cr) Bank Credit (In Rs. Lakh cr)
As on Nov 09, 2018 118.25 91.11
As on Oct 26, 2018 117.71 90.33
As on Nov 10, 2017 108.35 79.31
YTD (% change) 0.46% 0.86%
YoY (% change) 9.14% 14.88%

Source: RBI

Bond Market:

Commercial Paper (Fortnight): Outstanding (In Rs. Lakh cr) Amount issued (In Rs. Lakh cr)
15-Nov-18 5.85 1.07
31-Oct-18 5.88 0.95
15-Nov-17 4.82 1.03
% Change (MoM) -0.62% 12.63%
% Change (YoY) 21.37% 3.88%

Source: RBI

Liquidity Operation by RBI:

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

Corporate Bond Position (in Rs. lakh cr):

Source: RBI, Acuité Research

USD-INR Movement:

Source: RBI, Acuité Research

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