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WEEKLY WRAP

WEEKLY WRAP

Global yields fell, led by US 10Y which declined by 10bps even as consumer confidence, payrolls and home sales were strong. However, unemployment rate did edge up to 5.9% (est. 5.6%). India was an exception with yields rising on the back of concerns over higher borrowing by government and rising inflation. INR depreciated to a 2-month low amidst elevated oil prices. With gradual easing of restrictions, our weekly economic activity tracker picked up to 92 from 89 last week. Markets await US FOMC minutes to gauge future moves by US Fed.

 

Bonds: Despite higher than estimated addition to payrolls, US 10Y yield fell by 10bps (1.42%) as unemployment rate picked up to 5.9% from 5.8%. Yields were lower even in Europe and UK. Crude prices closed flat at US$ 76/bbl as OPEC+ talks on supply policy got delayed. India’s 10Y yield rose by 4bps (6.07%) with concerns over higher borrowing by government. RBI changed the price discovery method as more securities devolved on PDs. System liquidity surplus rose to Rs 5.7tn as on 2 Jul 2021 from Rs 4.6tn last week. 

Currency: Global currencies closed lower this week. DXY rose by 0.4% this week on the back of strong macro data (consumer confidence, jobless claims, payrolls and factory orders). AUD fell the most by 0.8% amidst rising Covid-19 cases. INR depreciated by 0.7% as oil prices remained elevated at above US$ 75/bbl. FII outflows were muted at US$ 21mn.

Equity: Barring Dow and Dax (higher), other global indices ended lower in the week. Better than expected non-farm payroll in the US helped Dow gain by 1%. On the other hand Shanghai Comp (2.5%) and Nikkei (1%) fell the most. Sensex (0.8%) too fell, led by power, oil and gas, and metal stocks.

Covid-19 tracker: Global Covid-19 cases rose by 2.7mn this week versus 2.6mn last week led by UK (0.2mn versus 89k). In India, cases rose by 0.3mn versus 0.4mn, last week. Our weekly economic activity tracker index rose to 92 (100=Feb’20) from 89. Israel has fully vaccinated 60% of its population, UK at 49% and US at 47%. India is at 4.5%. 

Upcoming key events: Major events this week include RBA policy and FOMC minutes. Additionally, global services PMIs, Europe industrial production and China’s CPI and PPI are also due. In India, trajectory of Covid-19 cases following a gradual reopening will be monitored. Monsoon has seen a lull and is now 1% above LPA versus 15% last year. Kharif sowing is also lower.

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