Call :
Liquidity would remain comfortable. Banks parked Rs 153.20 Bn to RBI under reverse repo window.
1Yr Ois:
The one-year swap rate ended at 4.82 percent from Wednesday's close of 4.86 percent.
10 Yr INR G Sec Bond :
Indian federal bond yields should ease early on Friday in line with a drop in U.S. yields, but the focus will be on April inflation data at around noon (0630 GMT) and a $2.7 billion auction during the day.
10 Yr USD Bond :
U.S. Treasuries rose on Thursday, sending long bonds up a point in price as losses in the euro and struggling stocks enhanced the allure of safe-haven government bonds.
Spot :
The Indian rupee should open week tracking share markets and currencies. Spot would be range between 45.00-45.40
Forwards 1Yr:
1 Yr Annualized Premia was closed at 2.61% on Thursday. In past few weeks forwards tracking spot very closely and any uptick in spot results in forwards receiving. Interbank is paying forwards on dips to give some support despite receiving from some corporate. Forwards would remain in the range of 2.50-2.75%.
Regards,
Mukul Mehta
Thursday, May 13, 2010
Tuesday, May 11, 2010
RBI Subbarao: Will revisit road map for liberalizing capital acct
RBI Subbarao:
Followed consistent policy on allowing FX flows
Capital acct convertibility means for stable growth
No Policy Tool Off Table For Managing Capital Inflows
Will revisit road map for liberalizing capital acct
"not contemplating" Tobin tax on flows
Context to decide choice of tools to manage flows
FX rate policy not guided by fixed target, band
FX rate policy for managing excessive volatility
Followed consistent policy on allowing FX flows
Capital acct convertibility means for stable growth
No Policy Tool Off Table For Managing Capital Inflows
Will revisit road map for liberalizing capital acct
"not contemplating" Tobin tax on flows
Context to decide choice of tools to manage flows
FX rate policy not guided by fixed target, band
FX rate policy for managing excessive volatility
Monday, May 10, 2010
USD INR Intraday view - 11th May 2010
Call :
This is the start of new reporting fortnight. Liquidity would remain comfortable. Banks parked Rs 294 Bn to RBI under reverse repo window.
1Yr Ois:
Indian one-year overnight indexed swaps rose from five-month lows on Monday, ahead of a slew of data this week and after a senior central banker revived inflation worries for the fixed income market.
The one-year interest rate swap ended at 4.81/84 percent, higher than 4.77/79 percent.
10 Yr INR G Sec Bond :
Indian federal bond yields are seen rising on Monday, tracking the weakness in U.S. Treasury prices and with sentiment expected to be dampened by the central Bank's announcement to auction cash management bills. The cash management bills would add to supplies and dampen the appetite for debt.
10 Yr USD Bond :
U.S. Treasuries tumbled on Monday after a $1 trillion plan to halt the euro zone's burgeoning debt crisis relieved investors of the fear that sent them scurrying into safe-haven government bonds last week.
The benchmark 10-year Treasury note tumbled more than a point in price during the steepest of the losses, pushing its yield up to 3.55 percent from Friday's close of 3.44 percent.
Spot :
Spot will open flat tracking the stock market and AXJ currencies. Spot should be range between 44.70 - 45.30
Forwards 1Yr:
1 Yr Annualized Premia was closed at 2.71% on friday. Intraday as spot looks bullish there might be some receiving int of the market but for fortnight dips in forwards should be paid as the daily carry is negative for received position.
This is the start of new reporting fortnight. Liquidity would remain comfortable. Banks parked Rs 294 Bn to RBI under reverse repo window.
1Yr Ois:
Indian one-year overnight indexed swaps rose from five-month lows on Monday, ahead of a slew of data this week and after a senior central banker revived inflation worries for the fixed income market.
The one-year interest rate swap ended at 4.81/84 percent, higher than 4.77/79 percent.
10 Yr INR G Sec Bond :
Indian federal bond yields are seen rising on Monday, tracking the weakness in U.S. Treasury prices and with sentiment expected to be dampened by the central Bank's announcement to auction cash management bills. The cash management bills would add to supplies and dampen the appetite for debt.
10 Yr USD Bond :
U.S. Treasuries tumbled on Monday after a $1 trillion plan to halt the euro zone's burgeoning debt crisis relieved investors of the fear that sent them scurrying into safe-haven government bonds last week.
The benchmark 10-year Treasury note tumbled more than a point in price during the steepest of the losses, pushing its yield up to 3.55 percent from Friday's close of 3.44 percent.
Spot :
Spot will open flat tracking the stock market and AXJ currencies. Spot should be range between 44.70 - 45.30
Forwards 1Yr:
1 Yr Annualized Premia was closed at 2.71% on friday. Intraday as spot looks bullish there might be some receiving int of the market but for fortnight dips in forwards should be paid as the daily carry is negative for received position.
Sunday, May 9, 2010
EU Approves euro 750 Billion Bailout
The European Union agreed on an audacious euro 750 billion ($955 billion) bailout plan in an effort to stanch a burgeoning sovereign debt crisis that began in Greece but now threatens the stability of financial markets world-wide.
The money would be available to rescue euro-zone economies that get into financial troubles. The plan would consist of euro 440 billion of loans from euro-zone governments, euro 60 billion from an EU emergency fund, and euro 250 billion from the International Monetary Fund.
Immediately after the announcement, the European Central Bank said it is ready to buy euro-zone government and private bonds "to ensure depth and liquidity" in markets, and the U.S. Federal Reserve announced it would reopen swap lines with other central banks to make sure they had ample access to dollars.
Asian stock markets opened higher on Monday, boosted by news of the EU package.
The giant bailout package reflects the gravity of the crisis gripping Europe and growing fears that the situation could grow so dire as to hamper the fragile rebound in the global economy. It casts aside long-held notions that each EU nation should manage its own finances, opening an era in which members of the common currency take on unprecedented responsibilities for each others' fiscal troubles.
In an indication of the world-wide concern, the White House said President Barack Obama on Sunday spoke with French President Nicolas Sarkozy and German Chancellor Angela Merkel to urge "resolute action to build confidence in the markets."
With a self-imposed deadline to reach agreement before Asian markets opened Monday morning, ministers from all 27 EU nations aimed to assemble a package impressive enough to arrest spreading worries about the debt problems of euro-zone governments. Once confident they could quarantine Greece's turmoil, the EU's leaders have been grappling with gathering worries about the debt problems of euro-zone governments such as Portugal, Spain and Italy.
IMF Managing Director Dominique Strauss-Kahn said the IMF was "ready to support our European members' individual adjustment and recovery programs through the design and monitoring of economic measures as well as through financial assistance, when requested."
While the stabilization fund is welcome news for investors who had been calling for the EU to take bigger steps, perhaps more important is the news that the ECB will act to shore up the shaky european bond market. Many investors had been calling for the ECB to take this step, and the ECB's failure to announce such a plan following a ECB governing council meeting last week was a key contributor to a significant sell-off Thursday.
The euro 440 billion pledged by euro-zone governments isn't immediately available cash in hand. Instead, a specially created off-balance-sheet entity will borrow the money, as needed, and then lend it out to the country or countries in trouble. The special entity's borrowings will be guaranteed by euro-zone countries—excluding the country asking for aid. This construction helps skirt the EU treaties' prohibition on one state's assuming the debt of another.
The guarantees are to be arranged in a "pro rata" manner, said EU Commissioner for Economic and Monetary Affairs Olli Rehn. Presuming they'd be divided up under the same rubric used for earlier loans to Greece, Germany would have the largest share of guarantees, committing to back up to euro 123 billion of the debt in case of further loans to Greece; France would shoulder euro 92 billion, and even tiny Cyprus would be on the hook, for nearly euro 1 billion. Those figures would rise if a larger country like Spain needed money. However, this portion would need approval by the parliaments of contributing countries, something that could delay a rapid payout of funds.
The EU will be able to mobilize the euro 60 billion chunk more quickly. Those are funds dispensed under the overall EU budget—under a treaty provision for natural disasters and other "exceptional occurrences." The crisis "is a threat to financial stability of the euro area and the European Union, and therefore it is justified," Mr. Rehn said.
The European countries and the IMF are putting together a "shock and awe" strategy involving massive amounts of money to convince markets that they can handle any sovereign debt problem in Europe, said Eswar Prasad, a former senior IMF official who is now an economist at Cornell University. While that effort would "certainly be good for stabilizing markets in the short run, [it] could create wrong incentives in the longer term," by making loans too easy to obtain without requiring borrowers to make necessary reforms, he said.
Facing a darkening mood in markets, euro-zone leaders met in Brussels late Friday to seal a euro 110 billion bailout for Greece, then convened the ministers' meeting Sunday to provide what Mr. Sarkozy called a "systemic response" to a "systemic crisis."
The strains in markets have grown along with disappointment among investors over how European officials have handled the crisis in the months since it became clear Greece was having trouble refinancing its debts. Last week, pressures began to build on European banks, where worries about their investment and loan exposure to Greece led to rising borrowing costs. It also sent the euro, the common currency of 16 EU countries, to its lowest levels since last March.
Spain and Portugal have decided to make additional spending cuts to bring down towering budget deficits more quickly, government representatives said. Spain plans to cut its budget deficit to 9.3% of gross domestic product this year, from 11.2% in 2009, and to 6.5% in 2011. It had previously pledged to lower the budget deficit to 9.8% of GDP this year. Portugal plans to cut its budget deficit to 7.3% of GDP this year, compared with an earlier target of 8.3%. Last year's budget deficit was 9.4% of GDP.
The money would be available to rescue euro-zone economies that get into financial troubles. The plan would consist of euro 440 billion of loans from euro-zone governments, euro 60 billion from an EU emergency fund, and euro 250 billion from the International Monetary Fund.
Immediately after the announcement, the European Central Bank said it is ready to buy euro-zone government and private bonds "to ensure depth and liquidity" in markets, and the U.S. Federal Reserve announced it would reopen swap lines with other central banks to make sure they had ample access to dollars.
Asian stock markets opened higher on Monday, boosted by news of the EU package.
The giant bailout package reflects the gravity of the crisis gripping Europe and growing fears that the situation could grow so dire as to hamper the fragile rebound in the global economy. It casts aside long-held notions that each EU nation should manage its own finances, opening an era in which members of the common currency take on unprecedented responsibilities for each others' fiscal troubles.
In an indication of the world-wide concern, the White House said President Barack Obama on Sunday spoke with French President Nicolas Sarkozy and German Chancellor Angela Merkel to urge "resolute action to build confidence in the markets."
With a self-imposed deadline to reach agreement before Asian markets opened Monday morning, ministers from all 27 EU nations aimed to assemble a package impressive enough to arrest spreading worries about the debt problems of euro-zone governments. Once confident they could quarantine Greece's turmoil, the EU's leaders have been grappling with gathering worries about the debt problems of euro-zone governments such as Portugal, Spain and Italy.
IMF Managing Director Dominique Strauss-Kahn said the IMF was "ready to support our European members' individual adjustment and recovery programs through the design and monitoring of economic measures as well as through financial assistance, when requested."
While the stabilization fund is welcome news for investors who had been calling for the EU to take bigger steps, perhaps more important is the news that the ECB will act to shore up the shaky european bond market. Many investors had been calling for the ECB to take this step, and the ECB's failure to announce such a plan following a ECB governing council meeting last week was a key contributor to a significant sell-off Thursday.
The euro 440 billion pledged by euro-zone governments isn't immediately available cash in hand. Instead, a specially created off-balance-sheet entity will borrow the money, as needed, and then lend it out to the country or countries in trouble. The special entity's borrowings will be guaranteed by euro-zone countries—excluding the country asking for aid. This construction helps skirt the EU treaties' prohibition on one state's assuming the debt of another.
The guarantees are to be arranged in a "pro rata" manner, said EU Commissioner for Economic and Monetary Affairs Olli Rehn. Presuming they'd be divided up under the same rubric used for earlier loans to Greece, Germany would have the largest share of guarantees, committing to back up to euro 123 billion of the debt in case of further loans to Greece; France would shoulder euro 92 billion, and even tiny Cyprus would be on the hook, for nearly euro 1 billion. Those figures would rise if a larger country like Spain needed money. However, this portion would need approval by the parliaments of contributing countries, something that could delay a rapid payout of funds.
The EU will be able to mobilize the euro 60 billion chunk more quickly. Those are funds dispensed under the overall EU budget—under a treaty provision for natural disasters and other "exceptional occurrences." The crisis "is a threat to financial stability of the euro area and the European Union, and therefore it is justified," Mr. Rehn said.
The European countries and the IMF are putting together a "shock and awe" strategy involving massive amounts of money to convince markets that they can handle any sovereign debt problem in Europe, said Eswar Prasad, a former senior IMF official who is now an economist at Cornell University. While that effort would "certainly be good for stabilizing markets in the short run, [it] could create wrong incentives in the longer term," by making loans too easy to obtain without requiring borrowers to make necessary reforms, he said.
Facing a darkening mood in markets, euro-zone leaders met in Brussels late Friday to seal a euro 110 billion bailout for Greece, then convened the ministers' meeting Sunday to provide what Mr. Sarkozy called a "systemic response" to a "systemic crisis."
The strains in markets have grown along with disappointment among investors over how European officials have handled the crisis in the months since it became clear Greece was having trouble refinancing its debts. Last week, pressures began to build on European banks, where worries about their investment and loan exposure to Greece led to rising borrowing costs. It also sent the euro, the common currency of 16 EU countries, to its lowest levels since last March.
Spain and Portugal have decided to make additional spending cuts to bring down towering budget deficits more quickly, government representatives said. Spain plans to cut its budget deficit to 9.3% of gross domestic product this year, from 11.2% in 2009, and to 6.5% in 2011. It had previously pledged to lower the budget deficit to 9.8% of GDP this year. Portugal plans to cut its budget deficit to 7.3% of GDP this year, compared with an earlier target of 8.3%. Last year's budget deficit was 9.4% of GDP.
Intraday Mkts View
Call :
This is the start of new reporting fortnight. Liquidity would remain comfortable. Banks parked Rs 275.45 Bn to RBI under reverse repo window.
1Yr Ois:
Indian one-year overnight indexed swaps eased to a fresh five-month low on Friday, tracking a fall in government bond yields and on expectations of steady policy rates in the coming weeks.
The one-year interest rate swap traded at 4.77/80 percent, off an intraday trough of 4.71 percent, its lowest since Dec. 1.
10 Yr INR G Sec Bond :
Indian federal bond yields fell on Friday, tracking global cues as fears that Greece's debt problems could develop into a wider sovereign credit crisis led to a rally in U.S. Treasuries.
10 Yr USD Bond :
U.S. Treasuries ended lower on Friday in volatile trading, as safe-haven demand cooled despite continuing fears over the sovereign debt crisis in Europe. Bond prices fell, ignoring a fresh sell-off in U.S. stocks that left the major indexes down as much as 2.0 percent for the day, after the U.S. Labor Dept reported larger-than-expected employment gains in April, suggesting the economic recovery was well underway.
Spot :
Spot will open weaker tracking the stock market and dollor index. Spot should be range between 45.00 - 45.40
Forwards 1Yr:
1 Yr Annualized Premia was closed at 2.50% on friday. These are very attractive lvls to pay as the daily carry is positive.
This is the start of new reporting fortnight. Liquidity would remain comfortable. Banks parked Rs 275.45 Bn to RBI under reverse repo window.
1Yr Ois:
Indian one-year overnight indexed swaps eased to a fresh five-month low on Friday, tracking a fall in government bond yields and on expectations of steady policy rates in the coming weeks.
The one-year interest rate swap traded at 4.77/80 percent, off an intraday trough of 4.71 percent, its lowest since Dec. 1.
10 Yr INR G Sec Bond :
Indian federal bond yields fell on Friday, tracking global cues as fears that Greece's debt problems could develop into a wider sovereign credit crisis led to a rally in U.S. Treasuries.
10 Yr USD Bond :
U.S. Treasuries ended lower on Friday in volatile trading, as safe-haven demand cooled despite continuing fears over the sovereign debt crisis in Europe. Bond prices fell, ignoring a fresh sell-off in U.S. stocks that left the major indexes down as much as 2.0 percent for the day, after the U.S. Labor Dept reported larger-than-expected employment gains in April, suggesting the economic recovery was well underway.
Spot :
Spot will open weaker tracking the stock market and dollor index. Spot should be range between 45.00 - 45.40
Forwards 1Yr:
1 Yr Annualized Premia was closed at 2.50% on friday. These are very attractive lvls to pay as the daily carry is positive.
Today's view - 10 May
usd/inr spot expected to open around 45.20 levels.. tracking dollar index correction & asian equity mkt recovery ... support seen around 45.10/ 44.98 resistance 45.35/60... sell on uptick for intra day .... .
Friday, May 7, 2010
Green back - In a world of ugly currencies, the dollar is sitting pretty
JOHN MAYNARD KEYNES once likened investing to judging a beauty contest. For today’s currency investor, however, none of the main contestants looks that fetching. “It’s more like an ugliness contest,” says one hedge-fund manager.
The dollar, for all its blemishes, is the least hideous-looking. So far this year it has risen against the other main currencies (the yen, pound and euro) that are traded internationally and held as reserves by central banks. It has risen most against the euro, which started the year at $1.43 but bought just $1.28 on May 6th (see chart). The euro has slumped in part because the Greek crisis makes it look a poor choice for reserve managers hoping to diversify their big dollar holdings. The variable quality of euro sovereign bonds is now much harder to ignore. Treasury bonds, with their liquid markets and unique issuer, look prettier.
The case for a further drop in the euro against the dollar has more than just momentum to back it. Business cycles favour it: the euro-area economy is picking up speed again, but America’s recovery is more advanced. The pressure to tighten fiscal policy in some parts of the euro area will make it hard for the European Central Bank to even consider raising interest rates. A weaker euro also addresses the deeper cause of the present crisis: a lack of export competitiveness in the south of the currency zone. It does not help Greece, Portugal and the rest compete with Germany, but it at least gives their firms a chance against imports from outside the euro bloc.
A cheaper euro hurts America, which will feel it is owed a chance for export-led growth after almost ruining itself as the world’s main consumer. By most fair-value gauges, the euro is still dear against the dollar, notwithstanding its recent slide. Even so, a weaker euro may crystallise a feeling that Europe is not doing its bit to support global demand.
Are there any beautiful currencies left? A handful had comfortably outpaced the dollar this year before the latest market tremors had investors grasping for greenbacks. Two such currencies are the Australian dollar and the Canadian dollar. Both are issued by rich countries with stable banks that have not sullied the public finances. Another is the South Korean won. Brazil’s real may over time develop as a reliable store of value. The trouble is, securities issued in these currencies are a tiny fraction of those available in the world’s four main currencies, says Stephen Jen of BlueGold Capital, a hedge fund. The lack of scale and liquidity limits their role as reserve currencies. The dollar has those plainer qualities in abundance.
The dollar, for all its blemishes, is the least hideous-looking. So far this year it has risen against the other main currencies (the yen, pound and euro) that are traded internationally and held as reserves by central banks. It has risen most against the euro, which started the year at $1.43 but bought just $1.28 on May 6th (see chart). The euro has slumped in part because the Greek crisis makes it look a poor choice for reserve managers hoping to diversify their big dollar holdings. The variable quality of euro sovereign bonds is now much harder to ignore. Treasury bonds, with their liquid markets and unique issuer, look prettier.
The case for a further drop in the euro against the dollar has more than just momentum to back it. Business cycles favour it: the euro-area economy is picking up speed again, but America’s recovery is more advanced. The pressure to tighten fiscal policy in some parts of the euro area will make it hard for the European Central Bank to even consider raising interest rates. A weaker euro also addresses the deeper cause of the present crisis: a lack of export competitiveness in the south of the currency zone. It does not help Greece, Portugal and the rest compete with Germany, but it at least gives their firms a chance against imports from outside the euro bloc.
A cheaper euro hurts America, which will feel it is owed a chance for export-led growth after almost ruining itself as the world’s main consumer. By most fair-value gauges, the euro is still dear against the dollar, notwithstanding its recent slide. Even so, a weaker euro may crystallise a feeling that Europe is not doing its bit to support global demand.
Are there any beautiful currencies left? A handful had comfortably outpaced the dollar this year before the latest market tremors had investors grasping for greenbacks. Two such currencies are the Australian dollar and the Canadian dollar. Both are issued by rich countries with stable banks that have not sullied the public finances. Another is the South Korean won. Brazil’s real may over time develop as a reliable store of value. The trouble is, securities issued in these currencies are a tiny fraction of those available in the world’s four main currencies, says Stephen Jen of BlueGold Capital, a hedge fund. The lack of scale and liquidity limits their role as reserve currencies. The dollar has those plainer qualities in abundance.
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