The Federal Open Market Committee held the federal funds rate in a range of 5.25% to 5.5% on Wednesday, a level it has maintained since last July. Chair Jerome Powell signalled that central bank officials are on course to cut interest rates in September unless inflation progress stalls, citing risks of further labour-market weakening. Powell said policymakers are moving closer to lowering borrowing costs from a more than two-decade high.
Top 3 Leads Today
- India Apr-Jun fiscal gap 8.4% of FY25 aim, capex down 35% YoY.
- India Ratings raises FY25 GDP growth estimate by 40 bps to 7.5%
- India's household debt may rise to $2.5 trln by 2030, says S&P
Indian Markets
- Money Markets Minute: The call money market rate closed at the RBI's repo rate of 6.50%, up from 5.75% on Tuesday, due to strong bank demand despite increased banking system liquidity. The weighted average call rate was 6.49%, compared with 6.47% on Tuesday.
- Government Bond Brief: Yields ended slightly lower as US treasury yields fell ahead of the US Fed meeting outcome. Traders avoided aggressive bets, and government and foreign banks booked profit on the day. The 10-year benchmark 7.10% 2034 bond closed at a 6.93% yield, unchanged from Tuesday. Turnover was ₹713.95 billion, slightly down from ₹750.35 billion on Tuesday.
- Corporate Bond Beat: Yields on corporate bonds remained steady in the secondary market as traders avoided significant bets ahead of the Fed's rate decision. Low participation resulted in a trade volume of ₹42.34 billion, down from ₹73.42 billion on Tuesday.
- Forex Flash: The rupee remained steady against the dollar, as exporters' dollar sales after the rupee hit a lifetime low balanced importers' ongoing dollar purchases. The rupee fluctuated within a 6-paise range, compared with Tuesday's 2-paise range, and closed at 83.7200 per dollar, slightly up from 83.7275 per dollar on Tuesday.
- Stocks Spotlight: Equity indices closed at record highs after a steady session, buoyed by strong retail investor inflows despite mixed global cues. The Nifty 50 and Sensex each rose 0.4%, closing at 24,951.15 points and 81,741.34 points, respectively.
International Markets
- US Stocks: On Wednesday, the S&P 500 and Nasdaq posted their largest daily percentage gains since February 22, the Dow index rose as chip stocks rallied, and the Federal Reserve left interest rates unchanged while hinting at a possible rate cut in September if inflation cools. The Dow Jones rose by 0.24%, reaching 40,842.79 on Wall Street. The S&P 500 experienced a gain of 1.58%, reaching 5,522.30, while the Nasdaq Composite saw a gain of 2.64%, reaching 17,599.40.
- Treasuries: Yields were largely down after the Federal Reserve held interest rates at current levels, as expected. The central bank said the economy "continued to expand at a solid pace," job gains moderated, and the unemployment rate "remains low." The yield on benchmark 10-year notes declined 9.6 basis points to 4.045%, from 4.141% on Tuesday. The 2-year note yield, which usually rises in tandem with interest rate expectations, plummeted 8.7 basis points to 4.276%, its lowest level since February 2.
- Currency: The dollar's losses deepened following the release of the Fed statement and remarks from Powell. Fed Chair Jerome Powell told reporters, "There is a growing sense of confidence that you could move at the next meeting" if inflation data confirms its current downward trend. The dollar index declined 0.37% to 104.06 against a basket of currencies, including the yen and euro. However, following the Bank of Japan's rate hike, the value of the dollar fell 1.75% versus the yen, to 150.08.
Trading Trends
Traded volume(in Cr) in corporate bonds by sector and maturity:
| Sectors | 0-1y | 1-3y | 3-5y | 5-10y | >10y |
|---|---|---|---|---|---|
| NBFC | 244 | 720 | 487 | 175 | 10 |
| Financial Institution | 300 | 170 | 329 | 187 | 30 |
| Public Sector Bank | - | - | - | 65 | - |
| Housing Finance Company | - | 101 | 31 | 101 | - |
| Private Sector Bank | - | - | - | 110 | - |
Secondary trade details for recently issued primary corporate bonds:
Security Name |
Issue Date |
Trades Since Issue(Cr) |
Avg Yield(%) |
LTY (%) |
|---|---|---|---|---|
| 7.54 BOI 19JUL34 | 2024-07-19 | 940.00 | 7.55 | 7.55 |
| 7.40 CANARA BANK 19JUL34 | 2024-07-19 | 575.00 | 7.39 | 7.39 |
| 8.00 TATAIND 21JUL25 C 17JUL26 M | 2024-07-19 | 504.00 | 7.95 | 7.94 |
| 8.01 TATACAPITAL 21JUL34 | 2024-07-23 | 349.00 | 8.00 | 8.00 |
| 8.60 GODREJFINLTD 25NOV27 | 2024-07-25 | 250.00 | 8.65 | 8.66 |
| 7.36 IOCL 16JUL29 | 2024-07-16 | 241.10 | 7.34 | 7.34 |
| 8.20 TFSIN 16JUL29 | 2024-07-16 | 165.00 | 8.19 | 8.19 |
| 7.39 IREDALTD 24JUL34 C 22JUL39 M | 2024-07-24 | 110.00 | 7.38 | 7.39 |
| 8.97 MUTHOOT FINANCE 18JAN27 | 2024-07-18 | 100.00 | 8.91 | 8.91 |
| 8.50 CHOLAINVFIN 25JUL27 | 2024-07-25 | 100.00 | 8.49 | 8.50 |
| 9.75 INDIABULLS HOUSING 23JUL29 | 2024-07-23 | 62.00 | 11.01 | 11.01 |
Source: Harmoney data analytics
Events This Week
August 1, Thursday:
- US Manufacturing PMI for July.
- Global Manufacturing PMI for July.
- US Domestic Auto Industry Sales for July.
- India Manufacturing PMI for July.
August 2, Friday:
- US Employment Report for July.
- India FX Reserves for Jul 22 week.
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