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Commentary

Lending rate news, and signs of bullishness?

  • TED Spread at 2.57, way below the highs of 4.5 or so. Still, a little high, but should get better.
  • 13 week treasury bill yield at 1.24%, which means people aren’t flocking to buy T-bills.
  • NSE Overnight MIBOR at 6.23%, but 14-day to 3-month values are still higher than 10%. Earlier overnight MIBOR had reached 16+%.
  • LIBOR’s getting lower and lower, says WSJ.
  • Large improvements in (lower) Euro borrowing yields, and lots of liquidity.
  • The US will fund $600 billion to money market funds, taking commercial paper as collateral, to ease redemption pressures.

The easing in the credit markets is getting more and more obvious. What isn’t, is that home prices aren’t going up, so the basic reason for the whole crisis (and probably, the recession) remains.

I can’t find the article now, but it seems a number of FIIs had lent shares to other entities who would short sell them, and take the money and put it in the Euro money markets. That spread has gone now, so will they come back in and buy? There still seems to be a lot of shorting going on – the index futures are sitting at almost no premium today. Is this a bullish indicator, all of it?

  • kanagala says:

    >Deepak,
    What is your suggestion for long term investors. Do you think, they can start buying into stocks. I have already invested into stocks at higher levels and thinking of investing more. Please suggest.

  • Guruprasad says:

    >LIBOR,MIBOR might go down.But who is there to lend money to borrowers.If there are lenders then all these things would be meaningful. Without meaningful lending, any data would remain as a data and people could proclaim that conditions has improved.TED has decreased- Somewhat positive, MIBOR decreased- Good for India.All these would be good in paper like the Real Estate companies having billion sq.ft of land in some unknown village that could translate into billion dollars which analyst justifies as a compelling value. Money market rates are identical to this situation. Lets be in action than just in paper.

  • Anonymous says:

    >Deepak an unrelated query – to this post. Had posted it earlier but i think you missed it.

    The question was on gilt funds, was just wondering are the funds you mentioned (templeton and tata) short-term, or the medium/long term ones?

    How does this work? If my reasoning is that interest rates have peaked and will head down now, but over the medium/long term then i go for a medium/long term fund? Since their bills are locked in at a higher rate?
    Or is a short term fund better since it offers flexibility – to you and the fund manager that is?

    Apologies for the ignorance πŸ™‚
    You can club me when we meet πŸ™‚

    Mark

  • Ramki says:

    >No signs of bullishness. We are heading towards a recession (slowdown as far as India is concerned). The latest D&B confidence survey done reflects a poor sentiment amongst corporates and so expect to see a significantly lower earnings in the coming quarter.

  • Anonymous says:

    >I noticed both you and galatime gone quiet on the long positions you held and were “adding” to. πŸ™‚

    If you *look* for bullish signs you will see plenty, but only when you ignore ALL the bearish signs.

    Pls do not call bottoms unless you know something market doesn’t. πŸ˜‰

  • Deepak Shenoy says:

    >kanagala: It's not a bad time to get in but I think the long term bottom isn't in yet. I'm only expecting a short term (< 3 months) bounce.

    Guruprasad: Lending is resuming at the bank-to-bank end, but not yet retail. I agree, unless this trickles down we may not see an impact up.

    Anon: Gilt – I won't bother with templeton, they've rejected my application and I'm still trying to get my money back! GSecs are hugely traded so mark-to-market, fund NAVs will have increased dramatically on the repo rate cut. Short temr is better since long term yields hadn't gone up so much (dropping yield = rising prices of bonds)

    Ramki: India will go through a recession. But earnings – I don't know about that…some corporates have shown remarkable growth in earnings.

    Anon: I've added a post on my long position πŸ™‚ And the bearish signs – you will agree that I have been only bearish till now, and still continue to be in teh long term. Just that this is a bounce effect working out. (all bullishness has to be short term) Bottom calling : I don't call bottoms, I'm just telling people what I traded!