The depreciation of Mexico's peso extended into its third day on Monday, leading to declines in global currencies against the dollar on concerns the U.S. economy could be headed for a recession. The Mexican currency was trading at 19.5645 pesos per greenback, down about 2% against the Reuters reference price from Friday. The peso's fall on Monday follows losses from Sunday night in its foreign operations, when the currency surpassed the psychological barrier of 20 pesos per dollar, a level not seen since October 2022. Mexico is highly sensitive to economic developments in the United States, its top trading partner and the destination for more than 80% of its exports. Mexican currency often triggers bitter memories of the peso crisis of the 1990s.
Top 3 Leads Today
- India July services PMI eases to 60.3 from 60.5 in June.
- SEBI amends mutual fund rules to curb front-running, insider trading.
- RBI lays down regulatory principles for credit risk models.
Indian Markets
- Money Markets Minute: The call rate ended well below the Reserve Bank of India's standing deposit facility rate of 6.25% as banks' demand for funds eased, with the liquidity surplus at its highest level in over two years. The weighted average call rate was 6.44%, up from 6.08% on Saturday.
- Government Bond Brief: Yields fell as US Treasury yields tumbled following weaker-than-expected US non-farm payroll data. The 10-year benchmark 7.10%, 2034 bond closed at 6.86% yield, compared to 6.89% yield on Friday. Turnover was ₹1.04 trillion, significantly higher than Friday's ₹709.10 billion.
- Corporate Bond Beat: Corporate bond yields fell marginally by 2-3 basis points across tenures in the secondary market, mirroring the decline in government bond yields. Trades totalling ₹142 billion were recorded on exchanges, up from ₹112.52 billion on Friday.
- Forex Flash: Despite the RBI's active dollar sales, the rupee settled at a record low against the dollar due to global risk aversion and recession fears in the US. The rupee fell 0.1%, closing at a lifetime low of 83.8450 per dollar, down from 83.7500 per dollar on Friday.
- Stocks Spotlight: Domestic equity indices fell sharply, mirroring global trends, due to concerns about the US recession, unwinding yen carry trade, and uncertainties in West Asia. The Nifty 50 and Sensex both dropped 2.7% to their lowest levels in over a month, closing at 24,055.60 and 78,759.40 points, respectively. India's VIX rose over 50%, the highest intraday rise in about nine years.
International Markets
- US Stocks: On Monday, the Nasdaq and S&P 500 tumbled at least 3% as the market extended last week's sell-off over recession fears. Apple shares plunged significantly after a major investor reduced its holdings. All three major indexes fell the most in three days since June 2022, and the Nasdaq and S&P 500 finished at its lowest levels since early May. The Dow Jones declined 2.60%, S&P 500 slid 3.00%, and Nasdaq fell 3.43%.
- Treasuries: Yields ended down on Monday but regained some ground after strong US services sector activity eased recession fears. The ISM reported on Monday that the service sector rebounded from a four-year low in July, and the non-manufacturing PMI jumped to 51.4 from 48.8 in June, beating economists' predictions. Also, Chicago Fed President Austan Goolsbee provided a positive outlook by stating that Friday's weak July jobs report should not be interpreted as a sign of a recession. The US 10-year notes lost 1.1 basis points to 3.785% from 3.796% Friday.
- Currency: The dollar declined on Monday as the yen surged to a seven-month high after a spate of economic data heightened the potential of a US economic slump and bigger interest rate cuts this year. Weak-than-expected US job data, combined with dismal earnings announcements from large technology companies and increased fears about the high-yielding currencies over the last week, made investors seek cash. The dollar index fell 0.46% to 102.68 from 102.15, its lowest level since January 12.
Trading Trends
Traded volume(in Cr) in corporate bonds by sector and maturity:
| Sectors | 0-1y | 1-3y | 3-5y | 5-10y | >10y |
|---|---|---|---|---|---|
| NBFC | 292 | 1791 | 1485 | 1562 | 206 |
| Financial Institution | 575 | 835 | 1385 | 641 | - |
| Housing Finance Company | 102 | 246 | 600 | 463 | 7 |
| Public Sector Bank | - | - | - | 29 | 60 |
| Other Utilities | - | - | - | - | 555 |
Secondary trade details for recently issued primary corporate bonds:
Security Name |
Issue Date |
Trades Since Issue(Cr) |
Avg Yield(%) |
LTY (%) |
|---|---|---|---|---|
| 7.37 IRFC 31JUL29 | 2024-07-31 | 1405.00 | 7.38 | 7.39 |
| 9.10 CHOLAINVFIN 27JUN31 | 2024-07-31 | 1155.00 | 9.10 | 9.10 |
| 7.98 BAJAJ FINANCE 31JUL29 | 2024-07-31 | 662.00 | 7.97 | 7.97 |
| 8.01 TATACAPITAL 21JUL34 | 2024-07-23 | 419.00 | 7.99 | 7.92 |
| 8.60 GODREJFINLTD 25NOV27 | 2024-07-25 | 250.00 | 8.65 | 8.66 |
| 8.50 GODREJHSGFIN 30NOV27 | 2024-07-30 | 240.00 | 8.55 | 8.57 |
| 8.50 CHOLAINVFIN 25JUL27 | 2024-07-25 | 135.00 | 8.49 | 8.50 |
| 7.39 IREDALTD 24JUL34 C 22JUL39 M | 2024-07-24 | 130.00 | 7.38 | 7.38 |
| 7.39 IIFCL 01AUG39 | 2024-08-01 | 110.00 | 7.38 | 7.38 |
| 8.1841 TFSIN 29SEP27 | 2024-08-01 | 90.00 | 8.20 | 8.20 |
| 9.75 INDIABULLS HOUSING 23JUL29 | 2024-07-23 | 66.01 | 11.01 | 9.72 |
| 10.30 IKFFIN 30JUL27 | 2024-08-01 | 55.00 | 11.16 | 11.35 |
Source: Harmoney data analytics
Events This Week
August 6, Tuesday:
- US International trade in goods & services for June.
August 7, Wednesday:
- US EIA weekly petroleum status report for Aug 2 week.
- India M3 Money Supply.
August 8, Thursday:
- US Unemployment insurance weekly claims report for Aug 3 week.
- US Weekly export sales.
- US Monthly wholesale trade for June.
- India Interest rate decision.
- India Reverse REPO rate.
- India Cash reserve ratio.
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