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.
Thursday, May 6, 2010
USD INR Intra day view - 7th May
usd/inr spot expected to open around 45.60 ... if it breaks 45.60 next resistance is 45.88 ... supports are 45.42./26 ... sell around 45.60-65 with a s/l of 45.70 for intra day ....
Asian Stocks, Euro Drop, Bond Risk Climbs on Europe Debt Risk
May 6 (Bloomberg) -- Asian stocks dropped the most in three months, European and U.S. futures declined and the euro weakened to its lowest level in almost 14 months on growing concern Greece’s debt crisis will spread and derail the global recovery.
The MSCI Asia Pacific Index fell 2.6 percent to 119.52 as of 3:33 p.m. in Tokyo, led by a 3.3 percent slump in the Nikkei 225 Stock Average as Japan’s markets opened after a three-day holiday. Two measures of credit-default swaps reached the highest level since Feb. 9. The euro dropped 0.5 percent to the lowest price since March last year. Standard & Poor’s Index futures lost 0.3 percent and those on the Euro Stoxx 50 Index retreated 1.1 percent.
“The Greece issues are raising concerns about the health of the financial system globally and slowing down the flow of money in markets,” said Ayako Sera, a strategist at Tokyo-based Sumitomo Trust & Banking Co., which manages $300 billion.
Portugal may have its credit rating cut by Moody’s Investors Service as the country struggles to reduce its budget deficit. Greece’s Parliament will debate today the austerity measures demanded as a condition of an internationally led bailout, a day after three people were killed in protests in Athens against the plan.
New Zealand’s jobless rate fell the most since at least 1986, signaling an economic rebound that central bank Governor Alan Bollard said may prompt an interest-rate increase “over coming months.” U.S. reports today and tomorrow that may show an improving labor market supported stock futures.
Shares Tumble
All of the MSCI Asia Pacific Index’s 10 industry groups declined, with 10 stocks dropping for each one that advanced. Australia’s S&P/ASX 200 Index declined 2.2 percent and South Korea’s Kospi Index fell 2 percent.
Canon Inc., a Japanese camera maker that counts Europe as its biggest market, dropped 3.3 percent to 4,210 yen. Toyota Motor Corp., which receives about 10 percent of its revenue from Europe, lost 2.9 percent to 3,560 yen.
The Markit iTraxx Asia index of 50 investment-grade borrowers outside Japan climbed 8 basis points to 122 basis points as of 7:44 a.m. in Singapore, prices from Royal Bank of Scotland Group Plc and CMA DataVision in New York show.
The Markit iTraxx Australia index rose 7.5 basis points to 106.5 as of 9:46 a.m. in Sydney, also the highest since Feb. 9, according to Australia & New Zealand Banking Group Ltd. and CMA.
Euro Weakens
The euro dropped to $1.2752 in Tokyo from $1.2814 in New York yesterday, the lowest level since March 2009. The New Zealand dollar surged, gaining 0.8 percent to 72.26 U.S. cents in Tokyo from 71.72 cents in New York yesterday.
The British pound climbed to a nine-month high against the euro on concern Greece’s debt crisis will spread through the 16- nation region. Britain votes today in an election that polls show may produce no parliamentary majority for the first time since 1974.
“The pound is now considered to be a safe-haven currency from the euro-zone, which is suffering from concerns over a contagion of sovereign problems,” said Toshiya Yamauchi, a senior foreign exchange analyst at Ueda Harlow Ltd. in Tokyo.
The U.K. currency advanced to 84.68 pence per euro, the highest since Aug. 6, 2009, before trading at 84.76 pence at 3:45 p.m. in Tokyo from 84.86 pence in New York yesterday.
South Korea’s won dropped the most in five months, declining 1.7 percent from May 4 to 1,134.55 per dollar, after markets were closed for a public holiday yesterday. Malaysia’s ringgit weakened 0.5 percent to 3.2455 per dollar.
Yuan Forwards
Yuan forwards slumped for a fifth day, the longest losing streak in almost nine months, on speculation China will delay appreciation of its currency. U.S. Treasury Secretary Timothy F. Geithner and Secretary of State Hillary Clinton are scheduled to travel to Beijing on May 24-25 to take part in the second U.S.- China Strategic and Economic Dialogue. Twelve-month non- deliverable forwards fell 0.3 percent to 6.6681 per dollar.
China’s Shanghai Composite Index lost 1 percent to a seven- month low on concern government curbs on property will hurt economic growth. China Vanke Co. and Poly Real Estate Group Co., the nation’s two biggest developers, fell at least 2 percent.
AU Optronics Corp. and LG Display Co. dropped after Tracfone Wireless Inc., the U.S. prepaid phone service division of America Movil SAB, sued the liquid-crystal display makers for price fixing. LG Display slid 2.7 percent in Seoul and AU Optronics retreated 1 percent in Taipei. Officials from the two companies declined to comment.
Copper for three-month delivery on the London Metal Exchange fell 0.3 percent to $6,940 a metric ton. Crude oil traded near a barrel after the biggest two-day drop in three months.
The MSCI Asia Pacific Index fell 2.6 percent to 119.52 as of 3:33 p.m. in Tokyo, led by a 3.3 percent slump in the Nikkei 225 Stock Average as Japan’s markets opened after a three-day holiday. Two measures of credit-default swaps reached the highest level since Feb. 9. The euro dropped 0.5 percent to the lowest price since March last year. Standard & Poor’s Index futures lost 0.3 percent and those on the Euro Stoxx 50 Index retreated 1.1 percent.
“The Greece issues are raising concerns about the health of the financial system globally and slowing down the flow of money in markets,” said Ayako Sera, a strategist at Tokyo-based Sumitomo Trust & Banking Co., which manages $300 billion.
Portugal may have its credit rating cut by Moody’s Investors Service as the country struggles to reduce its budget deficit. Greece’s Parliament will debate today the austerity measures demanded as a condition of an internationally led bailout, a day after three people were killed in protests in Athens against the plan.
New Zealand’s jobless rate fell the most since at least 1986, signaling an economic rebound that central bank Governor Alan Bollard said may prompt an interest-rate increase “over coming months.” U.S. reports today and tomorrow that may show an improving labor market supported stock futures.
Shares Tumble
All of the MSCI Asia Pacific Index’s 10 industry groups declined, with 10 stocks dropping for each one that advanced. Australia’s S&P/ASX 200 Index declined 2.2 percent and South Korea’s Kospi Index fell 2 percent.
Canon Inc., a Japanese camera maker that counts Europe as its biggest market, dropped 3.3 percent to 4,210 yen. Toyota Motor Corp., which receives about 10 percent of its revenue from Europe, lost 2.9 percent to 3,560 yen.
The Markit iTraxx Asia index of 50 investment-grade borrowers outside Japan climbed 8 basis points to 122 basis points as of 7:44 a.m. in Singapore, prices from Royal Bank of Scotland Group Plc and CMA DataVision in New York show.
The Markit iTraxx Australia index rose 7.5 basis points to 106.5 as of 9:46 a.m. in Sydney, also the highest since Feb. 9, according to Australia & New Zealand Banking Group Ltd. and CMA.
Euro Weakens
The euro dropped to $1.2752 in Tokyo from $1.2814 in New York yesterday, the lowest level since March 2009. The New Zealand dollar surged, gaining 0.8 percent to 72.26 U.S. cents in Tokyo from 71.72 cents in New York yesterday.
The British pound climbed to a nine-month high against the euro on concern Greece’s debt crisis will spread through the 16- nation region. Britain votes today in an election that polls show may produce no parliamentary majority for the first time since 1974.
“The pound is now considered to be a safe-haven currency from the euro-zone, which is suffering from concerns over a contagion of sovereign problems,” said Toshiya Yamauchi, a senior foreign exchange analyst at Ueda Harlow Ltd. in Tokyo.
The U.K. currency advanced to 84.68 pence per euro, the highest since Aug. 6, 2009, before trading at 84.76 pence at 3:45 p.m. in Tokyo from 84.86 pence in New York yesterday.
South Korea’s won dropped the most in five months, declining 1.7 percent from May 4 to 1,134.55 per dollar, after markets were closed for a public holiday yesterday. Malaysia’s ringgit weakened 0.5 percent to 3.2455 per dollar.
Yuan Forwards
Yuan forwards slumped for a fifth day, the longest losing streak in almost nine months, on speculation China will delay appreciation of its currency. U.S. Treasury Secretary Timothy F. Geithner and Secretary of State Hillary Clinton are scheduled to travel to Beijing on May 24-25 to take part in the second U.S.- China Strategic and Economic Dialogue. Twelve-month non- deliverable forwards fell 0.3 percent to 6.6681 per dollar.
China’s Shanghai Composite Index lost 1 percent to a seven- month low on concern government curbs on property will hurt economic growth. China Vanke Co. and Poly Real Estate Group Co., the nation’s two biggest developers, fell at least 2 percent.
AU Optronics Corp. and LG Display Co. dropped after Tracfone Wireless Inc., the U.S. prepaid phone service division of America Movil SAB, sued the liquid-crystal display makers for price fixing. LG Display slid 2.7 percent in Seoul and AU Optronics retreated 1 percent in Taipei. Officials from the two companies declined to comment.
Copper for three-month delivery on the London Metal Exchange fell 0.3 percent to $6,940 a metric ton. Crude oil traded near a barrel after the biggest two-day drop in three months.
Wednesday, May 5, 2010
Indian firms allowed to borrow more from abroad
Indian firms can borrow up to USD 40 bn this year from overseas markets, with the government moving in to ensure easy availability of funds for the rapidly recovering economy.
The high level co-ordination committee on external commercial borrowings decided in principle to raise the annual indicative ceiling to USD 40 billion for 2010-11 from USD 35 billion last year, a government official said.
The higher limit will allow Indian corporates to access cheaper funds abroad at a time when interest rates are set to harden in the domestic market due to the central bank’s monetary tightening measures.
The higher limit will come handy for infrastructure companies including those in telecom sector, which are expected to borrow heavily once the ongoing 3G auctions are complete. The government has allowed successful 3G winners, which are expected to pay nearly USD 10 billion, to refinance their domestic debt through ECBs.
The higher limit comes despite concerns that capital inflows into emerging markets could go up sharply, creating exchange rate and monetary management issues.
The companies are allowed to access overseas debt on a first-come-first-served basis within the $40 billion limit. But actual borrowing in the year could exceed the $40 billion limit as some dollar funds can also come through the automatic route, where prior approval from RBI is not needed.
The government seems to be of the view that credit needs and not capital flows is the more urgent issue now. Even the limit on foreign institutional investments into corporate bonds is likely to be hiked to USD 20 billion from USD15 billion.
The high level co-ordination committee on external commercial borrowings decided in principle to raise the annual indicative ceiling to USD 40 billion for 2010-11 from USD 35 billion last year, a government official said.
The higher limit will allow Indian corporates to access cheaper funds abroad at a time when interest rates are set to harden in the domestic market due to the central bank’s monetary tightening measures.
The higher limit will come handy for infrastructure companies including those in telecom sector, which are expected to borrow heavily once the ongoing 3G auctions are complete. The government has allowed successful 3G winners, which are expected to pay nearly USD 10 billion, to refinance their domestic debt through ECBs.
The higher limit comes despite concerns that capital inflows into emerging markets could go up sharply, creating exchange rate and monetary management issues.
The companies are allowed to access overseas debt on a first-come-first-served basis within the $40 billion limit. But actual borrowing in the year could exceed the $40 billion limit as some dollar funds can also come through the automatic route, where prior approval from RBI is not needed.
The government seems to be of the view that credit needs and not capital flows is the more urgent issue now. Even the limit on foreign institutional investments into corporate bonds is likely to be hiked to USD 20 billion from USD15 billion.
Goldman's Bonds are riskier than that of Citi's for the first time since Feb-09
Goldman Sachs Group Inc. bond yields show the firm’s credit is more hazardous than Citigroup Inc.’s for the first time since February 2009 as speculation grows legal and regulatory risks will depress its revenue.
According to Bank of America Merrill Lynch index, debt from the most profitable Wall Street firm yielded 2.73 percentage points more than Treasuries on average as of May 4. That compares with a spread of 2.29 percentage points for Citigroup, which got a $45 billion bailout in 2008 and repaid $20 billion in December. At the end of March, Citigroup spreads were 0.45 percentage point wider than Goldman Sachs’s. Wider spreads mean the New York-based investment bank, with $180.4 billion of unsecured long-term borrowing, may pay an extra $7.6 million in annual interest on every billion of debt it issues.
Fitch Ratings revised Goldman Sachs’s A+ ranking outlook to “negative” from “stable” yesterday on concern its reputation may be tarnished.
U.S. prosecutors are investigating Goldman Sachs, where Lloyd Blankfein has served as chief executive officer since 2006. The Securities and Exchange Commission filed a civil lawsuit on April 16 alleging fraud tied to collateralized debt obligations. The firm called the SEC’s claims “unfounded.”
Meanwhile, Bank of America Merrill Lynch’s Global Broad Market Corporate Index shows that elsewhere in credit markets, the extra yield investors demand to own company debt instead of Treasuries rose 5 basis points to 158 basis points, or 1.58 percentage point. That’s the biggest jump since March 30, 2009, when spreads widened by the same amount to a record 511 basis points. The yield premium has risen 16 basis points from the 2 1/2-year low on April 21.
A benchmark indicator of U.S. corporate credit risk soared to the most in three months. The Markit CDX North America Investment Grade Index increased 7.3 basis points to 105.1, the highest since Feb. 8, according to Markit Group Ltd. The index typically rises as investor confidence deteriorates and vice versa.
Besides, the Markit iTraxx Asia index of 50 investment-grade borrowers outside Japan climbed 8 basis points to 122, the highest since Feb. 9. The extra yield investors demand to own emerging-market bonds over Treasuries also rose 10 basis points to 290, the highest since Feb. 26, according to JPMorgan Chase & Co.’s EMBI+ Index.
According to Bank of America Merrill Lynch index, debt from the most profitable Wall Street firm yielded 2.73 percentage points more than Treasuries on average as of May 4. That compares with a spread of 2.29 percentage points for Citigroup, which got a $45 billion bailout in 2008 and repaid $20 billion in December. At the end of March, Citigroup spreads were 0.45 percentage point wider than Goldman Sachs’s. Wider spreads mean the New York-based investment bank, with $180.4 billion of unsecured long-term borrowing, may pay an extra $7.6 million in annual interest on every billion of debt it issues.
Fitch Ratings revised Goldman Sachs’s A+ ranking outlook to “negative” from “stable” yesterday on concern its reputation may be tarnished.
U.S. prosecutors are investigating Goldman Sachs, where Lloyd Blankfein has served as chief executive officer since 2006. The Securities and Exchange Commission filed a civil lawsuit on April 16 alleging fraud tied to collateralized debt obligations. The firm called the SEC’s claims “unfounded.”
Meanwhile, Bank of America Merrill Lynch’s Global Broad Market Corporate Index shows that elsewhere in credit markets, the extra yield investors demand to own company debt instead of Treasuries rose 5 basis points to 158 basis points, or 1.58 percentage point. That’s the biggest jump since March 30, 2009, when spreads widened by the same amount to a record 511 basis points. The yield premium has risen 16 basis points from the 2 1/2-year low on April 21.
A benchmark indicator of U.S. corporate credit risk soared to the most in three months. The Markit CDX North America Investment Grade Index increased 7.3 basis points to 105.1, the highest since Feb. 8, according to Markit Group Ltd. The index typically rises as investor confidence deteriorates and vice versa.
Besides, the Markit iTraxx Asia index of 50 investment-grade borrowers outside Japan climbed 8 basis points to 122, the highest since Feb. 9. The extra yield investors demand to own emerging-market bonds over Treasuries also rose 10 basis points to 290, the highest since Feb. 26, according to JPMorgan Chase & Co.’s EMBI+ Index.
European Union, Euro Currency Are Headed for Collapse: Gartman
The current European debt crisis likely will not end until the euro collapses as a currency and takes the entire European Union with it, said Dennis Gartman, hedge fund manager and author of "The Gartman Letter."
"I think the whole thing will go down to defeat, the whole thing will eventually unravel," Gartman said in an interview with CNBC.com.
Gartman said he doesn't have a specific timetable for how long it will take for the collapse of the 17-year-old EU, but said, "it doesn't look good."
The debt problems continued to escalate Wednesday as Greek citizens rioted in the streets over proposed austerity measures that would be required for any rescue plan to gain approval.
At the same time, Moody's warned that it might downgrade the debt for Portugal, accelerating worries that Greece's unremitting debt worries could spread across the continent.
Gartman holds the following long positions: 15 percent gold; 10 percent silver, and 15 percent each to Canadian and Australian dollars; he is short 15 percent each in euros, pounds and yen.
"It means confusion, it means a stronger dollar, it probably means weak commodity prices," Gartman said. "I think they should be out. People should be on the sidelines and out."
A correction of as much as 15 percent in the US market "would be normal," he said. "There's always a chance we could get worse than that."
In his daily letter to investors, Gartman said there is little chance of a peaceful, successful resolution of Greek's troubles.
"The modern Greek culture is so dependent upon government largesse, and is so used to the fact that Greek fiscal irresponsibility will be bailed out by the taxes paid by responsible German workers and businessmen, that we cannot see this being resolved short of Greece being summarily tossed out of the EMU, or removing itself voluntarily," he wrote.
He added that "we are not naive. Rather we are realists, and realists know that little other than chaos and the eventual breaking up of the EUR is the way of the future."
"I think the whole thing will go down to defeat, the whole thing will eventually unravel," Gartman said in an interview with CNBC.com.
Gartman said he doesn't have a specific timetable for how long it will take for the collapse of the 17-year-old EU, but said, "it doesn't look good."
The debt problems continued to escalate Wednesday as Greek citizens rioted in the streets over proposed austerity measures that would be required for any rescue plan to gain approval.
At the same time, Moody's warned that it might downgrade the debt for Portugal, accelerating worries that Greece's unremitting debt worries could spread across the continent.
Gartman holds the following long positions: 15 percent gold; 10 percent silver, and 15 percent each to Canadian and Australian dollars; he is short 15 percent each in euros, pounds and yen.
"It means confusion, it means a stronger dollar, it probably means weak commodity prices," Gartman said. "I think they should be out. People should be on the sidelines and out."
A correction of as much as 15 percent in the US market "would be normal," he said. "There's always a chance we could get worse than that."
In his daily letter to investors, Gartman said there is little chance of a peaceful, successful resolution of Greek's troubles.
"The modern Greek culture is so dependent upon government largesse, and is so used to the fact that Greek fiscal irresponsibility will be bailed out by the taxes paid by responsible German workers and businessmen, that we cannot see this being resolved short of Greece being summarily tossed out of the EMU, or removing itself voluntarily," he wrote.
He added that "we are not naive. Rather we are realists, and realists know that little other than chaos and the eventual breaking up of the EUR is the way of the future."
Today's intraday USDINR view
usd/inr spot expected to open around 45.20 ...as dollar index is due for correction sell on uptick for intra day with s/l of 45.35 & t/p of 44.84 .. supports are 45.14/45.01/44.84 - resistance 45.31
Tuesday, May 4, 2010
INDIA FINMIN SAYS MORE TAX RELIEF TO BE GIVEN TO CONSTRUCTION SECTOR
INDIA FINMIN SAYS MORE TAX RELIEF TO BE GIVEN TO CONSTRUCTION SECTOR
INDIA FINMIN SAYS RATE OF ABATEMENT TO BE ENHANCED TO 75 PCT FROM 67 PCT FOR CONSTRUCTION
INDIA FINMIN SAYS PROPOSE TO FULLY EXEMPT COMPONENTS OF OPTICAL DISK DRIVES FROM TAX
INDIA FINMIN SAYS RATE OF ABATEMENT TO BE ENHANCED TO 75 PCT FROM 67 PCT FOR CONSTRUCTION
INDIA FINMIN SAYS PROPOSE TO FULLY EXEMPT COMPONENTS OF OPTICAL DISK DRIVES FROM TAX
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