Daily Market Commentary - March 5, 2021 - Bonanza Portfolio
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Mr Vishal Wagh, Research Head
On Friday Indian equity benchmarks made a gap-down opening for the second straight session amid feeble global cues as rising US Treasury yields again rattled equity investors. Markets managed to trim most of their losses and are trading lower in early deals due to selling in Bankex, Capital Goods and Metal stocks. In the afternoon session, Indian equity benchmarks continued their lackluster trade amid negative cues from global markets. Both Sensex and Nifty are trading around 50,329 and 14,906 levels.
Most of the Asian equity benchmarks traded lower in early deals on Friday, burdened by the peaking government bond yields, weaker Wall Street and as Federal Reserve Chairman s remarks failed to calm concerns about higher interest rates and inflation.
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IMAGE: Ben Bernanke, Mark Gertler, Nobuhiro Kiyotaki, and John Moore, winners of the BBVA Foundation Frontiers of Knowledge Award in Economics. view more
Credit: BBVA FOUNDATION
The BBVA Foundation Frontiers of Knowledge Award in the Economics, Finance and Management category has gone in this thirteenth edition to Ben Bernanke (The Brookings Institution, Washington DC), Mark Gertler (University of New York), Nobuhiro Kiyotaki (Princeton University) and John Moore (University of Edinburgh) for fundamental contributions to our understanding of how financial market imperfections can amplify macroeconomic fluctuations and generate deep macroeconomic recessions, in the words of the award citation. In the last 15 years, says the committee, advanced economies have been hit by large macroeconomic shocks arising from the financial side. By 2008, fuelled by the liquidity glut stemming from emerging countries and by lax prudential supervision, many financial instit
Reflecting these concerns, the yield on the 10-year Treasury note, while still low, has risen meaningfully of late, to about 1.4 percent from 0.7 percent six months ago. This move has imposed serious losses on anybody who bought long-term Treasuries last summer and held them. The price of the iShares Treasury Bond ETF, for example, is down about 18 percent since the beginning of August.
In contrast to the views just quoted, Summers observes “administration officials’ dismissal of even the possibility of inflation.” Who is right, the investors or the politicians? Whose assessments of inflation risk do
you believe? Politicians may be expected to deny an economic result that would get in the way of their intense desire to spend newly printed money.
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Following requests from industry, New York State incorporated
legislative language addressing the expected discontinuance of
LIBOR in its recently released draft budget. The draft language
amends the General Obligations Law to require New York law-governed
contracts without LIBOR fallback provisions to use the replacement
rate recommended by the Alternative Reference Rates Committee
(ARRC).
1
Background
The U.K. Financial Conduct Authority (FCA), which regulates
LIBOR, has made clear that it will not compel banks to make LIBOR
submissions beyond 2021. Together with other official sector
bodies, it has strongly advised industry to transition away from