Making Sense

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 ...

Asian Equities are off to a positive start following yet another record closing for U.S Equities. U.S equities rose to fresh highs encouraged by the start of the earnings season and buoyed by hopes of a Trump Presidency. Bloomberg Headline “China weighs stock market rescue package backed by $278 bn” are supporting the sentiment. According to Reuters, Chinese major state-owned banks are curtailing lending to tighten CNY liquidity in the offshore market and banks were seen selling USD in the onshore FX market. There is also some expectations that some easing will be announced before Lunar New Year celebrations in early February. On the day, BoJ will announce the monetary policy decision today with expectations for an end to NIRP pushed out to April in the wake of the 7.6 magnitude Earthquake earlier this month. Yields High Low Close DoD ▲ US 2Y          4.42  ...

Interest Rate Pricing off Fed Fund Futures pared back 36 bps of cuts this week as Comments from Federal Reserve’s Christopher Waller reinforced what markets were thinking – sharp deviation in Futures pricing from Fed Projections without a corresponding deterioration in Economic Data. UST bears were emboldened and the data release supported the Soft-Landing Narrative. S&P 500 closed at all time highs.   USD did not participate in Tsy rally at close of last week. USTs caught up to the USD bearishness. USD index closed the week higher by 0.80%. Atlanta Fed GDPNOW Final Est for Q4 GDP are at 2.4%, Control Group Retail Sales rose 0.80% (est 0.20%, prior revised higher to 0.50%), Initial Jobless Claims fell to Sep 22 lows and Continuing Jobless Claims fell to levels seen in Oct 2023. So far we have not seen the trends in employment numbers as were seen in   the sharp dip in Employment component of the ISM Non-Mfg. This week’s release of the S&P PMI numbers would be close...