Policymakers at the Federal Reserve seemingly got the official go-ahead to begin lowering interest rates this month after a government report on Friday revealed that U.S. firms hired significantly fewer workers in August and July than economists had predicted. According to the Labor Department, nonfarm payrolls increased by 142,000 jobs in August. This was after an upwardly revised rise of 89,000 jobs in July. The three-month average monthly payroll increase is now 116,000, far below the 200,000 economists say is required to meet current job-growth needs in a population that has grown due to immigration.
Top 3 Leads Today
- RBI may shift to neutral stance as monsoon eases food inflation concerns.
- Forex reserves jump $2.3 billion to fresh record of $683.9 billion.
- India's fuel demand dips 2.6% y/y in August, diesel demand drops.
Market Recap: The Week That Was
- Money Markets Minute: The interbank call money rate remained steady around the RBI’s standing deposit facility rate of 6.25% for most of the week due to comfortable liquidity in the banking system. The liquidity surplus widened last week as the government had month-end spending.
- Government Bond Brief: The benchmark yield remained anchored at 6.85%, and closed largely unchanged on Friday for the third straight week as market focus turned to US economic data that may impact future rate reduction by the central bank. The benchmark 10-year yield closed at 6.8542%, slightly lower than its previous closing rate of 6.8554%. The bond at 6.8647% last Friday and has remained within a 5-basis points range for the past three weeks.
- Corporate Bond Beat: Yields remained flat last week across yield curve amid low trade volumes in the secondary market. Investors lapped up primary issuance. Few banks and mutual funds traded for most part of the week to churn their portfolios.
- Forex Flash: The Indian rupee rose on Friday, tracking regional currency advances ahead of the US employment report that will help investors assess the Federal Reserve's rate cut this month. Nevertheless, during the week, the rupee's value slightly declined by 0.1%. The dollar index fell below 101 following the release of disappointing US private payrolls data, which suggested a slowdown in the labour market and increased the anticipation of a weaker jobs report.
- Stocks Spotlight: The benchmark Indian indexes had their worst week in three months on Friday due to market concerns ahead of the US jobs report, which is expected to impact the extent and pace of the Federal Reserve's interest rate cuts. The blue-chip indexes fell roughly 1.5% this week, interrupting a three-week winning streak and dropping from record highs on Monday as the latest US economic data stoked concerns that the Fed may have delayed too long to lower rates.
Trading Trends
Most actively traded Corporate bonds in the Standard Lot Market:
| ISIN | Security Name | Volume (Cr) | Avg. Yield(%) |
|---|---|---|---|
| INE103D08021 | 6.79 BSNL 23SEP30 | 2345 | 7.65 |
| INE476A08241 | 8.27 CANARA BANK PERP 29AUG29 C | 1770 | 7.58 |
| INE040A08997 | 3.00 HDFC BANK 30SEP24 | 1600 | 7.62 |
| INE261F08EJ7 | 7.64 NABARD 06DEC29 | 1465 | 7.5 |
| INE053F08411 | 7.37 IRFC 31JUL29 | 925 | 7.31 |
Most actively traded Corporate bonds in the Odd Lot Market:
| ISIN | Security Name | Volume (Cr) | Avg. Yield(%) |
|---|---|---|---|
| INE996U07230 | 10.40 SICREVACAP 23AUG26 | 56 | 13.32 |
| INE476A08241 | 8.27 CANARA BANK PERP 29AUG29 C | 27 | 6.7 |
| INE07HK07718 | 12.50 KRAZYBEESERVICES 19OCT25 | 26 | 12.5 |
| INE160A08308 | 8.47 PNB PERP 22MAR29 C | 26 | 5.38 |
| INE0L6807104 | 0% AAFSPL 13OCT26 | 19 | 0 |
Traded volume in corporate bonds by maturity:
| Maturity | Volume(in Cr) |
|---|---|
| 1Y | 4949 |
| 3Y | 4629 |
| 5Y | 5700 |
| 7Y | 338 |
| 10Y | 3198 |
Source: Harmoney data analytics
The Week Ahead
- Money Markets: The one-day call rate may open higher on Monday as demand for bank funds may increase following outflows beginning Monday for excise duty and TDS payments. On Monday, the one-day call rate ranged between 6.00 and 6.60%.
- Government Bonds: Yields will likely drop on Monday, tracking US treasury yields on Friday, as investors remain concerned about the US economy's health after the Labor Department revealed that US employment increased less than expected and the unemployment rate fell to 4.2% in August, as expected. The 10-year benchmark yield is projected to move between 6.83% and 6.89%.
- Corporate Bonds: Yields may remain steady as investors focus on primary issuances this week. Trade volumes may remain modest amid a lack of fresh triggers for the corporate bond market. Market participants will closely watch US data next week to assess the amount of rate cut that the Fed will take on September 18.
- Forex: The rupee is expected to open firm against the US dollar on Monday and will focus on the movement of crude oil prices. Market participants expect that if the rupee were to fall to 84 per dollar this week, the RBI may continue to intervene and expect rupee to move in 15 paise range between 83.85-84.00 a dollar on Monday.
- Stocks: The movement of the benchmark indices will be influenced by global cues, particularly US data due out this week. Market participants expect the Federal Reserve to cut interest rates by 50 basis points at its September FOMC meeting. Investors will also watch the rupee's movement versus the dollar and crude oil prices for further clues.
Events This Week
September 9, Monday:
- US Employment Trends Index for August.
- US Monthly Wholesale Trade for July.
- US Consumer Credit for July.
September 10, Tuesday:
- US Quarterly Financial Report - Industry for Q2.
September 11, Wednesday:
- US Real Earnings for August.
- US CPI for August.
September 12, Thursday:
- US Unemployment Insurance Weekly Claims Report for Sep 7 week.
- US PPI for August.
- US Weekly Export Sales.
- India Industrial Production for July.
- India Inflation Rate for August.
- India Manufacturing Production for July.
- India Passenger Vehicles Sales for August.
September 13, Friday:
- US Import & Export Price Indexes for August.
- India Foreign Exchange Reserves for Sep 6 week.
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