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Showing posts from May, 2018


Changing tides Global bond yields have, over the past few months, started to rise as markets expect inflation to perk up and central banks shift gears towards a more hawkish monetary stance. The United States Federal Reserve, a few months ago, declared its intent to start the process of unwinding its previous bond purchases and therefore shrink liquidity. US bond yields consequently spiked to 2.74%. German treasury bills too have risen from 0.41% to 0.77% over the past twelve months, prodded by comments from Mario Draghi, the head of the European Central Bank, that future bond purchases by the ECB will begin to moderate. All of this is in the backdrop of robust economic growth in America at 2.3% and in the Eurozone at 2.5% last year. Since the global financial crisis, central banks kept credit markets functioning, bailed out banks and provided assurances to wobbly bond markets. Perhaps, the protracted era of bonhomie is coming to an end as the interest rate cycle begins to tur


Clouds on the horizon India’s economy has accelerated over the last couple of quarters with GDP growth around 7.2% between October and December. This is led mainly by robust consumer demand manifested most evidently in rising automobile sales, representative of buoyancy in urban and rural spending. More importantly, there are now perceptible signs of a turning investment cycle complemented by a recovery in the agricultural economy. Barring misfortunes within the banking system such as the recent one involving Punjab National Bank, the recapitalisation initiative should spur lending, especially to small and medium enterprises that rarely have access to other forms of funding, specifically the equity and bond markets. We believe that this momentum will be sustained in the coming year and expect GDP growth to rise to between 7% and 7.5%. Oil prices that surged last year have begun to moderate and with new shale supplies kicking in, should hopefully soften over the coming months.