INDIA: Country Wrap: Trump Punishes India
Aug-07 05:22
- The Monetary Policy Committee on Wednesday decided to press the pause button on its benchmark interest rate and neutral stance as broadly expected, giving a clear signal that the central bank is keeping its powder dry for uncertainties arising out of any tariff threat from the US. The time limit for using the dry powder, however, will be short as the MPC decision came hours before US President Donald Trump’s late evening tariff bombshell of an additional 25% tariff on India for buying Russian oil, after 21 days. Earlier in the day, Reserve Bank of India Governor Sanjay Malhotra said in his monetary policy statement, “The current macroeconomic conditions, outlook and uncertainties call for continuation of the policy repo rate of 5.50% and wait for further transmission of the front-loaded rate cut to the credit markets and the broader economy. Accordingly, the MPC unanimously voted to keep the repo rate unchanged.” (source Financial Express)
- US President Donald Trump, who imposed an additional 25 per cent tariff on India for New Delhi's ties with Russia, has again hinted at imposition of “secondary sanctions”. However, it remains unclear whether Donald Trump has threatened secondary sanctions solely on India or on other countries as well. Donald Trump made the fresh ‘secondary sanction’ threat when he was asked why India was being “singled out” for its business ties with Russia, but not other countries that have been buying Russian energy. (source MINT)
- Unsurprisingly the NIFTY 50 fell at the open on the tariff news and is currently down -0.45% for a third day of losses.
- The Rupee is doing very little in early trade at 87.69 and remains the only of its regional peers posting losses over the last five trading days.
- Bonds are strong with the 10-year -1.5bp in yield at 6.40%
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CHINA: Country Wrap: FX Reserves Up Again
Jul-08 05:18
- China is considering doubling an investment channel local investors use to buy bonds overseas, according to people familiar with the matter, a major step in its efforts to loosen restrictions on financial flows. Regulators in the country have held early talks about expanding the so-called Southbound Bond Connect program to as much as 1 trillion yuan ($139 billion), said the people, who asked not to be identified because the details are private. The expansion would be through an up to 500 billion yuan annual quota to non-bank financial institutions, which are currently left out of the trading link. (source BBG)
- China's foreign exchange reserves rose 1.3 percent in April from the month before, while its gold reserves increased for the sixth consecutive month, according to official data. China's forex holdings expanded by USD41 billion to USD3.2817 trillion as of April 30 from March 31, mainly as a result of currency exchange rates and asset price changes, the State Administration of Foreign Exchange announced yesterday. (source Yicai)
- China's major bourses were strong with the Hang Seng leading the way with gains of +0.79%, CSI 300 up +0.74%, Shanghai Comp up +0.58% and Shenzhen rising +1.07%
- Yuan Reference Rate at 7.1534 Per USD; Estimate 7.1796
- CGB 10 yr remains at 1.64%
LOOK AHEAD: Eurozone Timeline of Key Events (Times BST)
Jul-08 05:18
| Date | Time | Country | Event |
| 08-Jul | 0700 | DE | Trade Balance |
| 08-Jul | 0745 | FR | Foreign Trade |
| 08-Jul | ---- | EU | ECB de Guindos At ECOFIN Meeting |
| 09-Jul | 1145 | EU | ECB Lane At House of the Euro |
| 09-Jul | 1200 | EU | EC De Guindos Closing Remarks At Conference |
| 10-Jul | 0700 | DE | HICP (f) |
| 10-Jul | 0800 | EU | ECB Cipollone Digital Euro Lecture |
| 10-Jul | 0900 | IT | Industrial Production |
| 11-Jul | 0745 | FR | HICP (f) |
| 11-Jul | 1230 | EU | ECB Cipollone At Ukraine Recovery Conference |
| 15-Jul | 0800 | ES | HICP (f) |
| 15-Jul | 1000 | EU | Industrial Production |
| 15-Jul | 1000 | DE | ZEW Current Expectations Index |
| 16-Jul | 0900 | IT | HICP (f) |
| 16-Jul | 1000 | EU | Trade Balance |
| 17-Jul | 1000 | EU | HICP (f) |
| 17-Jul | ---- | EU | ECB Cipollone At G20 Meeting |
STIR: RBA Dated OIS Shunts Firmer After Surprise RBA Decision
Jul-08 05:10
RBA-dated OIS pricing is 11-23bps firmer across meetings after the RBA surprised the market by leaving the cash rate at 3.85%. A 25bp rate cut today was given a 92% probability by the market ahead of the decision.
- A cumulative 62bps of easing is priced by year-end (based on an effective cash rate of 3.84%) versus 75bps pre-RBA.
Figure 1: RBA-Dated OIS – Post-RBA Vs. Pre-RBA
Source: Bloomberg Finance LP / MNI
