Why bond prices and interest rates are inversely related

The Reserve Bank of India (RBI) will not let go off the bond market, deputy governor Michael Patra said June 24, adding that the central bank will aid the government's market borrowing. “(The) RBI is reacting on an ongoing basis,” Patra said at an event in New Delhi. “This year we have to shift our gaze to inflation but we will not let go off the bond market and we will make dispensation of other type like the HTM (held to maturity).” In this year’s budget, the government had estimated a fiscal deficit target of 6.4 percent of gross domestic product. Simply put, a fiscal deficit occurs when the government’s expenditure exceeds revenue from taxes and other sources. A fiscal deficit is mainly financed through market borrowings like treasury bills and government bonds. New Delhi aims to borrow a record Rs 14.31 lakh crore via bonds this financial year. The RBI, as the government's debt manager, is expected to manage the borrowing programme and keep yields low. It is currently … [Read more...] about RBI will not let go off bond market, says Deputy Governor Patra

Copper or Doctor Copper as market analysts refer to it due to its reputation of having a “Ph.D. in economics” because of its ability to predict the direction of global economy, has tumbled significantly in the recent past and is currently trading at its 15-month low on the London Metals Exchange (LME). The past trends of copper prices and global economic growth have signified that both the copper prices and global economy move in tandem and one can predict the turning points in global economy based on the direction of global copper prices. Experts are of the opinion that the correlation between copper prices and global economic health does largely hold good, though, at times there might be some brief aberrations. “Aberrations may occur due to governments’ interventions in the form of fiscal stimulus, or the major central bankers’ trying to respond to the changing macro-economic conditions by the way of change in their monetary policies”, said Praveen Singh, AVP, Fundamental … [Read more...] about Dr Copper’s falling prices indicate more ailments on the cards for global economy

Share to Twitter Share to Linkedin The drumbeats of economic blame have been pounding away. Inflation. Inflation. Inflation. Some, like Lawrence Summers, have been saying this for many years. Too much money in the system that would in theory boost activity and eventually drive prices up. Or, as an economist, who will remain anonymous, once said jokingly about a big name in his field and predictions of recessions, “Paul Krugman made a career of saying, ‘We're going to have a recession this year” for 15 years. When one finally happened, he said, ‘See? I told you.’ And he got the Nobel Prize.” Oh, Nobel Committee, Summers is waiting for that telephone call. Ironically, as someone who’s frequently been wrong and loath to admit it , as Michael Hirsch wrote about Summers some time back in The Atlantic, there’s a strong argument that he helped propel the reckless global capital flows and fight off regulation that would result in the Great Recession, the … [Read more...] about Inflation Blame Game Targets Consumers And Workers

- A + A SINGAPORE/TOKYO (June 24): Global stocks and bonds headed for their first weekly gain in a month on Friday (June 24), with growth concerns tempered by hopes that sliding commodity prices can help brake runaway inflation. MSCI's broadest index of Asia-Pacific shares outside Japan rose 1.4% on Friday, helped by short sellers bailing out of Alibaba — which rose nearly 7% — amid hints that China's technology crackdown is abating. Japan's Nikkei rose 1.2% for a 2% weekly gain, while S&P 500 futures extended overnight gains by 0.76%. EuroSTOXX 50 futures rose 1% and FTSE futures rose 0.6%. The week has been marked by steep declines for commodities on worries that the world economy is looking shaky and that interest rate hikes will hurt growth — which in turn is also prompting traders to pare back some bets on the size of rate hikes. Copper, a bellwether of economic output with its wide range of industrial and construction uses, is heading for its steepest … [Read more...] about Bruised stocks find support as growth fears dent commodities

Share to Twitter Share to Linkedin If you’ve pumped gas, bought groceries, traveled or dined out in recent months, you don’t need me to tell you that inflation is having a significant impact on your purchasing power. While many of today’s workers have never seen inflation this high during their lifetimes, most people in or nearing retirement age remember it well. In fact, I was just beginning my career as a wealth advisor the last time we experienced rates this high. Yet, the current rate of 8.3% pales in comparison to the rates we saw in the late 1970s and early 1980s. By 1980, inflation had topped 14%, and unemployment was over 7.5%, based on historical data from the Federal Reserve (Fed). While most economists do not expect broad inflation measures to reach double-digits, the current environment has been challenging for many individuals and families trying to find creative ways to make their budgets stretch further. Because the forces behind inflation are … [Read more...] about Debunking 6 Inflation Myths

- A + A NEW YORK (June 25): With US stocks on track to mark their worst first half of the year in more than 50 years, investors are studying a range of metrics to determine whether the coming months could bring relief or more of the same. By any stretch, the first half of 2022 (1H22) has been a challenging one for investors. The S&P 500 is down around 18% year-to-date, on track for its worst first half of any year since 1970, according to S&P Dow Jones Indices, as the US Federal Reserve (Fed) tightens monetary policy in its fight against the highest inflation in decades. Bonds, which investors typically count on to counterbalance stock declines in their portfolios, have fared little better: The US bond market, as measured by the Vanguard Total Bond Market Index fund, is down 10.8% for the year to date, putting it on pace for its worst performance in modern history. With investor expectations fluctuating between continued high inflation and an economic … [Read more...] about Bruised US stock investors brace for more pain in 2H22

“The time is appropriate to go for a further increase in the policy rate to effectively deal with inflation and inflation expectations,” RBI governor Shakitkanta Das, who heads the six-member panel, said. "As our policy in recent months has been unambiguously focussed on withdrawal of accommodation, both in terms of liquidity and rates, the change in the wording of stance should be seen as a continuation and fine-tuning of our recent approach," Das added. "The withdrawal of accommodation, as I see it, would be non-disruptive to the process of recovery and would strengthen our ongoing efforts to combat inflation and anchor inflation expectations." The MPC raised the repo rate by 50 basis points on June 8 , almost a month after it had gone for 40 basis point hike in an off-cycle policy meeting to combat rising price pressure. One basis point is one-hundredth of a percentage point. Retail inflation came in at 7.04 percent in May , easing from a near-eight-year high of 7.79 … [Read more...] about RBI committed to bringing inflation within target, MPC meeting minutes show

Representative Image Dollar-rupee onshore forward premiums have seen a steady fall of late and the market has seen heightened volatility. The one-year onshore forward premium narrowed to 220 paise on June 22, its lowest level since December 2011. Currently, the one-year premium is at 244 paise compared to 356 paise at the start of this year. In the last two weeks, this has dropped by as much as 60 paise. Assessing the impact of falling forward premiums on the outlook for the rupee is important, especially against the backdrop of persistent foreign outflows, a widening trade deficit and soaring price pressures. The rupee closed at a record low of 78.3862 on June 22 and is down over 5 percent against the dollar so far this year. Also read: RBI present in forex market, will not allow jerky moves in rupee, says Deputy Governor Patra First, what are forward points? Close The forward point is the interest rate differential between two countries. These … [Read more...] about Explained | Why are dollar-rupee onshore forward premiums falling? Five key questions answered

The Taegeukgi, or Korean national flag, and the Samsung Electronics flag fly outside the company’s office in Seocho District, southern Seoul. [JOINT PRESS CORPS] Comments on a recent YouTube video featuring Samsung Electronics Vice Chairman Lee Jae-yong conjure up thoughts of comment sections under popular K-pop music videos. With over 10,000 comments, many flocked to praise Lee for welcoming U.S. President Joe Biden during his visit to Korea in fluent English, calling the 54-year-old businessman the “pride of Korea” and “a true patriot.” But in another alley, called the civic group community, Lee, son of late Samsung Electronics Chairman Lee Kun-hee, is labelled an aggressor, disrupting the country’s order and legal system due to his history of violating the law. Samsung Electronics Vice Chairman Lee Jae-yong shakes hands with U.S. President Joe Biden on May 20 at the company's chip plant in Pyeongtaek, Gyeonggi. [YONHAP] The contrasting views over just one person … [Read more...] about [WHY] Koreans’ love-hate relationship with Samsung

(Representative image: Reuters) A day after endorsing Ukraine's candidacy to join the European Union, the bloc's leaders turned their attention to the severe economic turbulence looming over the coming months as the full impact of Russia's war sinks in and the threat of recession rises. The EU's 27 leaders gathered in Brussels to grapple with surging inflation, energy shocks, dwindling business and consumer confidence, and growing budget pressures. The leaders also will have to contend with higher borrowing costs as the European Central Bank prepares to raise interest rates for the first time in 11 years to counter runaway price increases. ECB President, Christine Lagarde, who plans to raise rates next month and again in September, joined the EU summit to discuss the darkening economic outlook. Swedish Prime Minister Magdalena Andersson said, "We are in a difficult situation, its very important that we have this discussion." The EU has spent the previous decade battling … [Read more...] about EU leaders tackle inflation, energy shocks from Russia’s war