A “quite chunky” supply of government bonds in Italy this week is being offset by coupon and redemption proceeds out of Spain, and “we think the recent outperformance of the latter in the broader country spread compression may have further to run,” says Nomura International. That said, it says, (yield) differentials have covered some distance already and are especially susceptible to a reversal of the “re-risking” them, it adds.
Bunds remain in negative territory Monday, but are showing little immediate reaction to the latest euro zone money supply data which show the M3 measure growing by 3.5% in the year to June, in line with market expectations. The September bund futures contract is currently down 0.17
on the day at 120.16, unchanged from prior to the numbers. The 10-year bund is down 0.26 at 100.00, yielding 3.50%, unchanged from prior to the money supply data.
If India’s overall rainfall deficiency falls to 20%-25%, India’s GDP growth could fall to sub-5% this fiscal year, says Mridul Saggar, chief economist at Kotak Securities. India government forecasts FY economic growth of between 6.25% and 7.75%. Meteorological Department forecasts rainfall
in June-September wet season at 93% of long-term average, which not an
unusually large deviation, but distribution so far has been extremely uneven,
with some areas flooded while others parched. After driest June in 83 years, 4 of India’s 28 provinces declared drought. A slump in the agricultural sector
would pressure government to respond with support measures, even as it already struggles with fiscal deficit of 6.8% of GDP. Jahangir Aziz, chief India
economist at JPMorgan, estimates inflation to rise by 2 to 3 percentage points over RBI’s baseline forecast of 4% if monsoon rains don’t pick up.