Hurrah to the India Interim Budget and do the CRE problems portend for things to get Nastier // US10Y lifts off ahead of the swing support

For Indian markets, the Interim Budget was a positive development. Consolidation path was way ahead of the expectations / Fiscal consolidation will likely be even stronger as the budget assumptions have been very conservative / No sops or Rural transfers – no major populist measures / Cap exp as share of GDP. The Government continued on the path of pre committed fiscal consolidation roadmap announced in the 2021-22 budget, to reduce fiscal deficit below 4.5% by 2025-26. The fiscal deficit in 2024-25 is estimated to be 5.1 per cent of GDP, adhering to that path.

The gross and net market borrowings through dated securities during 2024-25 are estimated at ` 14.13 and 11.75 lakh crore respectively. Both will be less than that in 2023-24. Now that the private investments are happening at scale, the lower borrowings by the Central Government will facilitate larger availability of credit for the private sector.

Overnight in Global Markets,

Fresh concerns have risen around Commercial Real Estate (CRE) as New York Community Bancorp, Tokyo-based Aozora Bank, Switzerland based Julius Baer made higher loan loss provisions for CRE alongside Deutche Bank which made higher loan loss provisions on account of the same. The New York Community Bancorp closed another 11% lower and the KBW Regional Banking Index closed a further 2.30% lower. We don’t know if the problem is confined to the above Regional Banks or the situation extends to other Banks and threatens macro financial stability. CRE loans have been a discussion point for long now and identified as a troubled area. We also had yields on the US10s come strikingly close to the previous swing lows of 3.79%.

Yields	High	Low	Close	DoD ▲	Intraday Move
US 2Y	4.26	4.13	4.21	-0	13
US10Y	3.96	3.82	3.88	-3	14
US2s10s	-0.30	-0.33	-0.33	-3	3
US30Y	4.20	4.07	4.12	-5	14
JGB 10Y	0.74	0.68	0.69	-4	6
DE10Y	2.22	2.12	2.16	-1	10

Jobless Claims number also came in softer and the Unit Labor Cost rose below est. at 0.50% and the labor productivity which is output / hours worked rose above est at 3.20%. The ISM Manufacturing PMI came in above est at 49.10. The employment component came in soft while the prices paid component and new orders came in sharply higher.

	IJC	CJB	4W MA CJB
Last Print	2,24,000	18,98,000	18,41,250
L-1 Print	2,15,000	18,28,000	18,33,750
WoW Change	9,000	70,000	7,500

A cumulative 144 bps of rate cuts are being priced into 2024 as implied by the Fed Fund Futures and USD index closed 0.43% lower.