Corporate Bond Market Update – November 2014

Global Markets

US Non-Farm Payroll (NFP) released in Nov’14 increased modestly by 214K. The nonfarm work week edged higher, and the unemployment rate fell to a new cyclical low. A key focus for the markets came from an unexpected upward revision to 3rd quarter US GDP growth to an annualized pace of 3.9%. Other big three – Japan, euro zone and China – have all displayed significant weakness relative to the perceived long-term trend.

Euro-zone Government bond yields hit record lows on back of investors’ expectations of European Central Bank (ECB) embarking on buying of large quantities of sovereign debt under asset purchase program.

MSCI Emerging Markets Index closed almost flat on a month-on-month basis despite high-volatility during Nov’14. The People’s Bank of China (PBoC) surprised the market with unexpected cuts in 1-year deposit to 2.75% (-25 bps) and 1-year lending rate to 5.6% (-40 bps). Bank of Indonesia surprisingly hiked its policy rate to 7.75%. Crude oil prices fell to fresh 4-year lows.

India Macro Developments

  • Fuel Prices:  Even though the GOI deregulated diesel prices, the full pass-through has not yet happened for consumers. As a consequence of the deregulation, diesel prices were cut 3 times for total of Rs.6.21/liter between September 2014 and end-November, but the government increased the excise duties by Rs.2.25/ litre, partially reversing the cuts.
  • Inflation: The CPI inflation reading for the Oct ’14 was much lower at 5.52% y/y as compared to Bloomberg estimate of 5.7%. Most notably core inflation was at 5.86%, lowest since the CPI combined inflation data has been released. WPI reinforced the falling retail inflation trend and printed at 1.8% y/y for Oct ’14 against 2.83% for Sept ‘14.
  • Trade Deficit: Trade deficit narrowed marginally in Oct’14 to USD 13.3b as compared to USD 14.25b in Sept’14. The narrowing happened partly on account of markedly lower oil imports, and helped substantially by lower crude oil prices, resulting in lower overall imports of 3.6% y/y. Exports in general have seen a slump indicating global headwinds of slower growth, and exports have declined by 5% y/y.
  • Borrowing & Liquidity: System liquidity remained comfortable during the month and the RBI saw a lot of bidding on the reverse repo side during the beginning of the month, e.g. reverse repo amounts Rs.222.86b exceeded repo borrowing amounts Rs. 203.41b.
  • Data on Core Industries: The index of eight core industries data released by the Office of Economic Adviser printed at 6.3% for Oct ‘14.

Highlights of bi-monthly Monetary Policy, dated 2nd Dec 2014:

  • Key policy rates remain unchanged;
  • A change in the monetary policy stance at the current juncture is premature, however, change in the monetary policy stance is likely early next year, including outside the policy review cycle.

The report further highlights recent corporate bond trading levels, primary bond issuances and summary of regulatory changes.

India Corporate Bond Report_Dec2014 (2)



The Association of International Wealth Management of India (AIWMI) is a not-for-profit organization and a globally recognized membership association for finance professionals. AIWMI primarily focuses on the broad and strategic role of developing a more robust and forward-looking training infrastructure for the financial services sector and to promote more active industry involvement and collaboration in training and continuing education. AIWMI is offering advanced international certification programs along with a wide variety of high-quality executive education programs. AIWMI programs combine state-of-the-art knowledge and skills with practical experience and insights into the functioning of the financial sector. All AIWMI courses and educational events have an intense and pragmatic curriculum. Participants are exposed to the latest developments within the financial services sector. AIWMI plays a key role in guiding the development of the financial services sector. AIWMI works with key industry participants’ viz. the Government, the Regulators, the Industries/Associations, the Corporate, the Media and the General Public to achieve its objectives. Besides enhancing technical competence and professionalism in the industry, AIWMI organizes events and facilitates discussions to promote best practices in leadership and talent development in the financial sector with an aim to become Asia’s premier center of excellence for financial education.

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