Although cost of funds remains high in the money market, THISDAY investigations revealed that some banks have actually cut their lending rates significantly to make it easy for big corporations to access funds, hitherto starched in their coffers.The big corporates, mainly the prime customers of the banks with thriving businesses in the food sector, manufacturing and processing, telecommunications and services among others, are accessing credit from banks at rates in the region of 11 per cent per annum, which is quite low compared to average maximum lending rate in the market at over 20 per cent.

A treasury with one of the banks explained: “There is no high risk premium on the transactions, unlike when lending to other customers of the bank.” He added: “These are people and organisations that the banks have been dealing with, have come to understand their businesses and can predict the future. Remember that the operating business environment in Nigeria is difficult and so when a customer comes to the bank to borrow money, he doesn’t just have to contend with the cost of the funds to the bank but the risks associated with his business, since a bank puts all that into consideration before arriving at the interest rate” he said.

The Central Bank of Nigeria (CBN) noted at the end of its monetary policy committee meeting last week that developments in interest rates structure indicated that the retail lending rates were still relatively high even though they were declining.According to the Committee, average maximum lending rate dropped to 22.56 per cent in May 2010, from 23.45 per cent in December, 2009. Also, average prime lending rate fell to 18.77 per cent in May 2010, from 19.03 per cent in December 2009.The result of trading activities at the inter-bank money market showed Nigerian Inter-bank Offer Rates (NIBOR), which had remained at about 1 to 2 per cent increasing last week.

The inter-bank lending rates rose to 8.25 per cent on average from 2 per cent the previous week after NNPC caused a major outflow, by withdrawing about N100 billion from the system. There was outflow to foreign exchange and fixed income securities purchases. There was also a dry up of the fiscal inflow in the system, both factors causing the rates to rise, one of the traders said.The NNPC reportedly sold about $600 million to some banks in the last two weeks and recalled part of the naira proceeds to its CBN account last week in compliance with CBN’s monetary control measures.

At the foreign exchange market, the naira, which gained 5 kobo at the first bi-weekly auction last Monday lost the 5 kobo at the second auction (last Wednesday) to exchange N148.50/$1. At the inter-bank market, the naira eased to N150.22 to the dollar from 149.70, which ended its two-week rally against the dollar.

Interest, Lending, Inter-bank, Securities Trading

As stated earlier, the big corporates majorly – the prime customers of banks with thriving businesses in the food sector, manufacturing and processing, telecommunications and services among others are accessing credit from banks at rates in the region of 11 per cent per annum, which is quite low compared to average maximum lending rate in the market at over 20 per cent. But lending rate to the private sector remains high, with the flow of credit falling to the very low levels.

The CBN in its market and economy review last week noted that as at May, 2010 aggregate domestic credit (net) grew by 12.38 per cent over the December 2009 level, and by 29.72 per cent when annualised, which was still below the 2010 indicative target of 55.54 per cent. Credit to government (net), which grew substantially by 50.87 per cent over end-December 2009 (or 122.1 per cent on annualised basis), was the major contributor. Credit to the private sector declined by 1.88 per cent (or 4.51 per cent on annualided basis), in contrast to the growth benchmark of 31.54 per cent for 2010.

The CBN further disclosed that the substantial growth of credit to government (net) against the backdrop of declining private sector credit reflected the risk aversion of banks to lending to non-government borrowers, adding that the “Committee believes that in order to provide the private sector with the necessary credit to grow the economy, further efforts are needed to unlock the credit market in order to enhance the flow of credit to the real economy.

The CBN noted that average savings rate dropped marginally to 2.92 per cent in May 2010 from 3.36 per cent in December 2009. The consolidated deposit rates declined to 3.30 per cent in May 2010 from 6.13 per cent in December 2009. Thus, the spread between the average maximum lending rate and the consolidated deposit rate widened to 19.27 per cent in May 2010 from 17.34 per cent in December, 2009.

CBN noted that the key policy challenges remained the negative growth in money supply and private sector credit as well as the subsisting high lending rates in the face of declining inter-bank rates.On inter-bank lending, cost of borrowing among banks increased last week, across low and high tenored papers, with the low instruments increasing by much higher percentage points.NIBOR increased to 8.25 per cent on average last week from 2 per cent the previous week, attributed to outflow especially that created by the NNPC that withdrew about N100 billion from the system.

The secured Open Buy Back (OBB) climbed to about 7.50 per cent on the average from 1.50 per cent. Overnight and call rates both rose to 8.5 per cent from 2 per cent and 2.50 per cent respectively.One of the dealers said the rates will most likely go up this week because of the extremely tight liquidity in the system.It was gathered that the opening balance in the accounts of banks with the CBN dropped to N54 billion last Friday from about N230 billion a week ago due to huge outflows.

Forex Transactions

The market indicated last week the gradual resurgence in demand for dollars at the market while dollar supply from the oil majors was drying up. The development triggered low performance of the local currency.Traders said some oil majors sold about $29 million by midweek last week but that the sales were not significant enough to support the naira.

As already indicated, the local currency, which gained by 5 kobo at the first in the bi-weekly auction last Monday when it traded N148.45/$1 as against N148.50/$1 previously, lost the 5 kobo at the second auction (last Wednesday) to exchange N148.50/$1. At the inter-bank market, the naira eased to N150.22 to the dollar from N149.70, which ended its two-week rally against the dollar. At the parallel market, traders exchanged N154/$1 as against N153/$1 at the beginning of last week.
The monetary authority sold only $150 million at the second of the bi-weekly auction last Wednesday, short of the $214 million demanded.

The CBN was reported to have made the lowest dollar sales in three months, at its auction last Monday. Banks bought the smallest amount of dollars in more than three months as demand from companies declined. CBN reportedly sold $117.1 million at the auction, the least since March 24, after putting $200 million on offer, the smallest available amount since the auction on March 29.

The foreign exchange market, according to the CBN remained relatively stable in the first half this year. During the period – January 1 to June 16, 2010, according to CBN data, total sales at 45 bi-weekly WDAS auctions amounted to $11,155.10 million, equivalent to an average of $247.89 million per auction. In the corresponding period of 2009, the sum of $12,995.48 million was sold at 70 daily and bi-weekly RDAS auctions, equivalent to an average of $185.65 million per auction.

The market regulator further stated that in May 2010, the average foreign exchange demand of $459.26 million per auction was recorded against the average sales of $394.45 million. As at June 23, 2010 average demand for the month dropped to $315.73 million and correspondingly, the average sales also declined, to $297.69 million, representing sales as a percentage of demand of 94.29.The CBN Governor, Sanusi Lamido Sanusi, told reporters last week that Nigeria is “comfortable” with current naira levels and believes the currency is unlikely to come under pressure, with foreign reserves capable of funding 16 months of imports.

Other Devts: Intervention fund

The CBN announced last week that N150billion out of the N500 billion intervention fund is ready for drawdown and will be accessed by 150 manufacturers before the end of this month.According to the Governor, the fund is targeted at deficit and strategic sectors of the economy. He however, noted that even though the power sector remains a key target, there have been no requests from that sector to access the fund, owing to the non conclusion of the power sector reforms.”So far, we’ve had about 150 companies that are going to borrow under the manufacturing tranche and that is about N150 billion” Sanusi said.

Microfinance

The apex bank also disclosed last week it was considering the Bangladesh model of microfinance for Nigeria. The CBN, said the Governor, will be sending a team to study the microfinance model in Bangladesh as it looks into the smooth operations of the lower segments of the financial sector.The Governor of the central bank of Bangladesh, Atiur Rahman, said Bangladesh authorities are willing to share their experiences in that sector with Nigeria, stressing that the microfinance sector has helped Bangladesh improve its economy and cope with the global financial crisis.

Rahman disclosed that a different body from the central bank regulates microfinance in that country, adding that commercial banks in Bangladesh extend 40 per cent of their credit to the microfinance banks, who in turn channel the fund for on lending to the small and medium enterprises sector as well as agriculture.

D-8 Central Banks
The D-8 central banks from Nigeria, Bangladesh, Egypt, Indonesia, Iran, Malaysia, Pakistan and Turkey met in Abuja last week and expressed their commitments to collaborate on monetary and fiscal issues in the interest of the economies of member countries.

Sanusi said the meeting was necessitated by the role central banks play in national economies, stressing that it has become crucial to review and adopt common regulatory regimes to safeguard financial systems stability and prevent a repeat of recent experience of the global meltdown.

The Minister of Finance, Dr. Olusegun Aganga, said areas of co-operation by D-8 central banks as drawn up by the secretariat was important especially for trade facilitation, adding that as developing countries : “We owe ourselves the duty to promote trade among ourselves in order to grow our economy at a faster rate than North-South trade will ordinarily afford us.”

The 30-share BSE Sensex advanced by 48.86 points or 0.29% to 16,620.89. The index touched a high and a low of 16,697.05 and 16,571.45, respectively.

The BSE Mid-cap and Small-cap indices gained 0.13% and 0.30%, respectively.

TECk up 1.19%, Auto up 0.88%, Public Sector Undertakings (PSU) up 0.49%, Information Technology (IT) up 0.47% and Capital Goods (CG) 0.45% were the main gainers in the BSE sectoral space.

On the other hand, Metal down 0.75%, Power down 0.22% and Bankex down 0.15% were the main losers in the BSE sectoral space.

RCom up 9.41%, ONGC up 3.36%, Bharti Airtel up 3.13%, Reliance Infra up 2.87% and Hero Honda up 2.36% were the major gainers on the Sensex.

On the flip side, Tata Power down 2.35%, Hindalco Industries down 1.92%, Jindal Steel down 1.49%, Wipro down 1.38% and HDFC Bank down 1.02% were the major losers on the index.

Meanwhile, the Cabinet decision to hike price for natural gas of $4.20 per mmBtu (million British thermal units) has been implemented from Tuesday, June 1, which will push up the production costs for power and fertilizer companies. Natural gas to power and fertiliser units is being sold at revised rates from June 1, but for city gas projects the hike will come into effect from June 8.

Last month, the Cabinet had approved the raising of gas price from Rs 3,200 per thousand cubic metres ($1.79 per mmBtu) to Rs 6,818 per thousand cubic metres ($3.818 per mmBtu). After adding royalty, the price for user industries would be Rs 7,500 per thousand cubic metres or $4.2 per mmBtu.

From the price hikes, ONGC and OIL would gain about Rs 5,000 crore and Rs 700 crore in revenue respectively. Similarly, GAIL India would gain Rs 150-200 crore in revenue annually.

The 50-share S&P CNX Nifty advanced by 15.25 points or 0.31% to 4,985.45. The index touched a high and a low of 5,008.60 and 4,967.05, respectively.

RCom up 9.76%, Idea up 7.45%, Ambuja Cements up 3.37%, ONGC up 3.26% and Bharti Airtel up 3.15% were the top gainers on the Nifty.

Suzlon down 3.60%, Hindalco down 2.54%, Tata Power down 2.17%, Jindal Steel down 1.91% and Cairn down 1.63% were the top losers on the index.

Liquidity condition in the system has tightened with banks borrowing heavily from the Reserve Bank of India (RBI) through its repo window. The dry up of liquidity from the system was mainly triggered by the Rs 68,000 crore payments made by telecom companies to government to acquire bandwidth for third generation (3G) mobile telecom licenses. Liquidity conditions are likely to improve as government starts spending money that it has received from the telecom companies.

Banks borrowed slightly over Rs 13,000 crore on Tuesday from the apex bank, more than double the amount borrowed on Monday. Banks borrowed Rs 5,840 crore through the repo window in the morning and Rs 7,325 crore in the second half on Tuesday.

Among other Asian indices, Hang Seng decreased 0.13%, KLSE Composite trimmed 0.54%, Nikkei 225 slid 1.12% and Taiwan Weighted declined 1.28%.

On the other hand, Shanghai Composite added 0.12%, Jakarta Composite advanced 0.33% and Straits Times gained 0.62%.

Major European markets are trading with hefty losses. FTSE 100 trimmed 1.65%, CAC 40 shed 1.51% and DAX contracted 1.71%.

Auto stocks fell for the second day in a row due to rate hike worries. Index heavyweight Reliance Industries jumped. But, the market breadth, indicating the overall health of the market was negative in contrast to a strong breadth earlier in the day. World stocks rose.

The market was volatile as traders rolled over positions in derivatives segment from the March 2010 series to the April 2010 series ahead of the expiry of the near-month March 2010 derivatives contracts on Thursday, 25 March 2010. The market surged in early trade, The Sensex had lost nearly 1% on Monday, 22 March 2010, after a surprise hike in short term interest rates by the Reserve Bank of India (RBI) which it announced after trading hours on Friday, 19 March 2010.

The market pared gains soon after an initial rally. The market further trimmed gains in morning trade, after moving a in a narrow range in morning trade. The market once again moved in a narrow range in mid-morning trade. The key benchmark indices recovered from lower level after erasing almost the entire intraday gains. However, the intraday recovery proved short-lived. The market slipped into the red in afternoon trade. The key benchmark indices regained positive zone in mid-afternoon trade.

Rollover of Nifty futures from March 2010 series to April 2010 series was about 40% at the end of Monday’s trade. Rollover in Mini Nifty futures was about 31% and the market wide rollover stood at about 36%. In individual stocks, GTL, National Aluminum Company, Reliance Power, GTL Infrastructure, and Bharti Airtel, have witnessed high rollover. But rollover was low in REC, Dish TV, Essar Oil, ITC and Welspun-Gujarat Stahl Rohren till Monday.

The stock market remains closed on Wednesday, 24 March 2010, on account of Ram Navmi
The government will allow private-sector firms to issue infrastructure bonds to raise funds for projects, Finance Minister Pranab Mukherjee said on Tuesday. Prime minister Manmohan Singh today said there is a need to spend $1 trillion in infrastructure in the five years to 2016/17.
Mukherjee said the capacity of banks to fund infrastructure projects is stretched and new sources had to be tapped, including allowing private firms to issue infrastructure bonds. The availability of equity, both domestic and FDI (foreign direct investment) continue to remain an area of concern, he said. ” We have still not completely succeeded in exploiting the full potential of insurance and pension funds for deployment in the infrastructure projects,” Mukherjee said.

India plans to spend $514 billion in the five years to 2011/12, and Mukherjee said this goal was proceeding as per schedule.

The Reserve Bank of India (RBI) after trading hours on Friday 19 March 2010, unexpectedly raised interest rates from record-low levels, citing intensifying inflationary pressures and a steady economic recovery. The market had widely expected the RBI to raise rates soon, but the timing of its 25 basis-point hike for its key lending and borrowing rates, before the April 2010 policy review caught market men by surprise.

The RBI raised the repo rate, the rate at which it lends to banks to 5% from 4.75% and reverse repo rate, the rate which it absorbs funds from the system to 3.50% from 3.25% with immediate effect. India is the second major economy after Australia to start raising interest rates with signs of global recovery emerging and local price pressures picking up. China has raised its banks’ reserve requirements but has left its rates unchanged.

The wholesale price index in Asia’s third-largest economy accelerated to 9.89% in February, the highest since October 2008 and well above the central bank’s end-March 2010 projection of 8.5% and the 8.56% reading for January 2010.

In the emergent scenario, low policy rates can complicate the inflation outlook and impair inflationary expectations, particularly given the recent escalation in the prices of non-food manufactured goods, the RBI said in a statement. While the recovery in growth has proceeded broadly along expected lines, the inflationary pressures have intensified beyond the central bank’s baseline projection, the RBI said.

The government may have to sacrifice a little bit of short-term economic growth after the rate increase, which was aimed at consolidating long-term growth, the Reserve Bank of India (RBI) governor D Subbarao said on Monday.

The country’s apex planning body has reportedly called for wide-ranging reforms in agriculture, while criticising the strategy employed by the government to increase farm output and tame soaring food prices.

The Planning Commission said the agriculture pricing system should be made more market-oriented by delinking support prices from procurement prices. It has also suggested measures such as abolition of levies and stocking limits, encouraging free movement of goods across the country and doing away with bans on exports and futures trading.

In its mid-term appraisal of the Eleventh Plan (2007-12) to be ratified by the full Planning Commission under Prime Minister Manmohan Singh on Tuesday, the panel pointed out that while the farm sector did well between 2005-06 and 2007-08 growing at 4%, the performance in the past two years showed that the government’s strategy was not effective and more needed to be done on the supply side to maintain growth.

Meanwhile, poor performance in the power, road and port sectors has resulted in actual investment in infrastructure falling below the level envisaged in the Eleventh Plan period despite a robust growth in telecom sector.

Coming back to stocks, encouraging Q4 March 2010 advance tax figures of top Indian firms, indicating good Q4 March 2010 results, had boosted the bourses last week. The market also witnessed a strong post-Budget rally driven by sustained buying by foreign funds since the presentation of the Union Budget 2010-2011 on 26 February 2010. The stock market gave a thumbs up to the Union Budget 2010-2011 due to its thrust on infrastructure development, government’s pledge to reduce fiscal deficit over the next three years, a smaller-than-expected 2% hike in excise duties, and reduction in taxes for individuals which will boost disposable income. The Finance Minister has assumed a modest GDP growth of about 8% and inflation of about 4.5% for 2010-2011.

Going ahead, the key triggers for the stock market are structural reforms such as decontrol of petrol and diesel prices, targeting of food subsidies, and financial sector reforms such as increase in foreign direct investment in insurance sector.

European stocks were moderately higher Tuesday, following a strong session in the US on Monday. The key benchmark indices in France, Germany and UK rose by between 0.53% to 0.82%.

European leaders recently tried to allay concerns that they were unprepared to aid Greece easing pressure on higher-yielding assets. The ECB president said the central bank is prepared to reassess its collateral rules if necessary, softening its stance as Greece struggles to cut the region’s largest budget shortfall.

Most Asian shares rose on Tuesday, supported by investor expectations of an ongoing recovery in the world economy, and as tech stocks drew support from gains in their US peers. Sentiment was also lifted by the passage of the US healthcare legislation in the House of Representatives late Sunday. The key benchmark indices in Hong Kong, Indonesia, South Korea, Singapore rose by between 0.26% to 0.68%.

But the key benchmark indices in China, Taiwan and Japan fell by between 0.31% to 0.70%. Shares in China reversed earlier gains as financial stocks and property developers weakened on concerns about weaker dividends from the upcoming earnings reports.

Trading in US index futures indicated Dow could gain 18 points at the opening bell on Tuesday, 23 March 2010.

After a weak opening US stocks finally closed higher on Monday led by healthcare stocks as the passage of the health-care bill lifted uncertainty surrounding the legislation that was hanging over the market. The Dow Jones Industrial Average rose 43.91 points or 0.41% to 10784.89. The Nasdaq rose 20.99 points or 0.88% to 2395.40 and S&P 500 gained 5.91 points or 0.51% to 1,165.81.

As per provisional figures, the BSE 30-share Sensex was up 30.14 points or 0.17% to 17,440.71. The Sensex fell 53.93 points at the day’s low of 17,356.64 in afternoon trade. The barometer rose 120.22 points at the day’s high of 17,530.79 in early trade.

The S&P CNX Nifty was up 18.40 points or 0.35% at 5223.60 as per provisional figures.

The BSE Mid-Cap index rose 0.14% and the BSE Small-Cap index rose 0.25%.

The market breadth, indicating overall health of the market, was negative. That was in contrast to a strong breadth earlier in the day. On BSE, 1253 shares advanced as compared with 1508 that declined. A total of 106 shares remained unchanged.

Among the 30 Sensex shares, 15 stocks fell while the rest rose.

BSE clocked a turnover of Rs 4175 crore, lower than Rs 4618.91 crore on Monday, 22 March 2010.

Index heavyweight Reliance Industries (RIL) rose 1.42%, extending recent gains on expectations of good Q4 March 2010 results. As per the market buzz, RIL’s Q4 advance tax surged to Rs 770 crore in Q4 March 2010 from Rs 365 crore a year ago. Meanwhile, Reliance Industries is reportedly seeking a joint venture with Atlas Energy to develop the US firm’s Marcellus Shale gas operations.

Reliance Industries on 14 March 2010 announced a sports and entertainment joint venture with IMG Worldwide, a global leader in sports marketing and management. The equal venture, IMG Reliance, will set up modern infrastructure and coaching facilities for sports and create and operate sports and entertainment assets including celebrity management.

Cairn India rose 3.92% after parent Cairn Energy of UK lifted its estimates for reserves at its Indian operation and said the unit’s Rajasthan fields could produce more oil than previously thought. Cairn raised its estimates of oil and gas in place in Rajasthan to 4 billion barrels of oil equivalent (boe) from 3.7 billion boe and said there could be another 2.5 billion boe yet to be discovered. The Edinburgh-based company said the fields had the potential to pump 240,000 boe per day. Previously the company said it hoped to exceed its target of 175,000 boe per day but did not specify by how much.

India’s largest engineering & construction firm by sales Larsen & Toubro (L&T) fell 0.42% in a volatile trade. The company said today it got orders worth Rs 1500 crore. L&T’s advance tax payment fell marginally to Rs 270 crore in Q4 March 2010 from Rs 275 crore a year earlier.
But, other capital goods stocks rose. Siemens, Praj Industries, Bharat Heavy Electricals, Thermax, Punj Lloyd rose by between 0.51% to 1.26%.

India’s largest mobile services provider by sales Bharti Airtel fell 3.1% and was the top loser form the Sensex pack. The company has tied up the entire financing requirement of $8.3 billion for its planned buy of Kuwaiti telecom Zain’s African assets, in a sign of progress as the deadline for the firms’ talks expire this week. Bharti and Zain are in exclusive talks until 25 March 2010, marking the third time Bharti has tried to get its hands on a meaningful African business after two failed bids for South Africa’s MTN.

Rate sensitive auto stocks extended Monday’s fall triggered by a rate hike by the central bank. India’s largest commercial vehicle maker by sales Tata Motors fell 2.89%, extending Monday’s 3.02% fall after company said it is offering an early conversion of notes into stock through an auction to help reduce the debt on its balance sheet. The company, whose products range from the premium Jaguar and Land Rover to the ultra-cheap Nano car, on Tuesday invited holders of its foreign currency convertible notes to submit applications to convert them into shares.

Bondholders will get an enhanced conversion ratio in the offer, which runs through 29 March 2010, the truckmaker said in a statement today. The plan covers 11.8 billion yen ($131 million) of zero-coupon notes due March 2011 and $300 million of 1% bonds due in April 2011.

India’s largest tractor maker by sales Mahindra & Mahindra (M&M) fell 0.07%, with the stock sliding for the fifth day. The company paid Rs 235 crore in advance tax in Q4 March 2010 versus nil payment a year earlier.

India’s largest bike maker by sales Hero Honda Motors fell 0.42%. Hero Honda has short-listed Karnataka as one of the states for setting up its fourth manufacturing plant. Hero Honda Motors has reportedly proposed an investment of Rs 2,000 crore for the upcoming plant.

India’s largest car maker by sales Maruti Suzuki India fell 0.28%, extending recent slide triggered by fears increase in competition may dent sales. Recently, Ford India entered the small car market with ‘Figo’.

Bajaj Auto fell 0.32%. As per recent report a joint venture between Nissan Motor, Renault S.A. and Bajaj Auto is working to make a car that will match the price of Tata Motors’ Nano.

Increase in raw material prices coupled with costs associated with new emission norms could force auto makers to increase prices further, which may hit volumes. The government raised excise duties on large cars and sport utility vehicles by 2%, which was immediately passed on by vehicles makers, including top carmaker Maruti Suzuki and utility vehicle makers Mahindra & Mahindra and Tata Motors. From 1 April 2010, all vehicles will have to comply with Euro IV emission norms across 13 major cities, adding to costs and setting the stage for another round of price hikes.

Pharma stocks rose on hopes of a surge in US exports after the US Congress passed the heavily-contested healthcare bill on Sunday, 21 March 2010. Dr Reddy’s Laboratories, Cipla, Biocon, Lupin, Ranbaxy Laboratories, Pfizer rose by between 0.01% to 3.34%.

Piramal Healthcare surged 3.72%, after the company signed a pact with Cipla for acquiring i-pill, an emergency contraceptive pill, for a consideration of Rs 95 crore.

Following the passage of the landmark healthcare bill, multinational firms may now be willing to put more money to buy into India’s formulations companies. The healthcare bill is the US government’s attempt to reduce healthcare costs. The Obama administration would make a nearly $1-trillion commitment in taxpayer money over the next decade to help an estimated 32 million uninsured Americans get health coverage. The bill also promotes use of generic drugs that are often one-tenth the price of the original version, but has the same impact.

Analysts opine that this would translate into huge opportunities to Indian companies as India has the largest number of US Food and Drug Administration approved pharma plants outside the US. India was among the 14 countries named in the Congress discussion that can offer low-cost drugs to achieve lower healthcare costs.

Metal stocks rose on strong domestic demand. Hindalco Industries, Steel Authority of India, Gujarat NRE Coke, Welspun Gujarat Stahl Rohren, Jindal Saw and JSW Steel rose by between 0.29% to 3.15%.

India’s largest steel maker by sales Tata Steel rose 1.15%. Its Q4 advance tax payment rose to Rs 513 crore from Rs 406 crore a year earlier.

India’s largest copper maker by sales Sterlite Industries rose 0.46%. As per recent reports, a legal fight seems likely between Sterlite Industries and US copper miner Asarco LLC. The American company has filed a lawsuit against Sterlite for going back on a two-year old deal to acquire Asarco. This prompted Sterlite to also file a lawsuit against Asarco to claim recovery of about $50 million (about Rs 230 crore) that was deposited earlier.

But, National Aluminium Company fell 1.62%. The Union Minister for Mines has ruled out any possibility of disinvestment in the state-run aluminium firm.

Jindal Steel & Power advanced 2.77% on reports the company will invest $10 billion to set up a coal-to-liquid plant and a 2,000 megawatt thermal power plant in Orissa.

Compact Disc India was locked at 20% upper limit at Rs 79.30, after the company secured a large animation contract worth $82 million.
Sonata Software galloped 8.10%, after the company partnered with an independent non-profit organization dedicated to improving testing processes and software quality on a global scale.

The 30-share BSE Sensex rose 17.37 points or 0.10% to 17,182.36. The index touched a high and a low of 17,213.34 and 17,150.06, respectively.

The BSE Mid-cap and Small-cap indices advanced by 0.40% and 0.76%, respectively.

The main gainers in the BSE sectoral space were Oil & Gas up 1.62%, Capital Goods (CG) up 0.84%, Consumer Durables (CD) up 0.83%, Auto up 0.57% and Healthcare (HC) up 0.51%.

The main losers in the BSE sectoral space were Bankex down 0.78%, Fast Moving Consumer Goods (FMCG) down 0.63%, Public Sector Undertaking (PSU) down 0.38%, TECk down 0.10% and Reality down 0.08%.

In the wake of surging prices of milk and other dairy products, the government has decided to remove the duty on skimmed milk powder (SMP) and some other dairy products. The surging prices of milk have been one of the major contributors in the current high food inflation rate. The government had recently mentioned that the sale price of milk has increased by Rs 1-7 per litre in the country from January 2009.

The Revenue Department has issued a notification in this regard and has allowed the dairy industry to import up to 30,000 tonne SMP at zero duty in a financial year. As per the existing norms, the dairy industry is allowed to import only up to 10,000 tonne SMP at 5% duty under tariff rate quota (TRQ).

The major gainers on the Sensex were RIL up 1.80%, L&T up 1.43%, Sun Pharma up 1.40%, ONGC up 0.94% and Hero Honda up 0.86%.

The major losers on the index were Bharti Airtel down 1.99%, HDFC Bank down 1.76%, ITC down 1.35%, ACC down 1.22% and JP Associates down 1.04%.

Cement continues to remain strong and after witnessing a hike immediately after the budget, cement prices may see another 5-10% move in the current or coming month as the crunch in inputs and transportation keeps the supply side in check.

Cement prices had increased by around Rs 8-10 a bag after the finance ministry hiked or rather restored the excise duty partially from 8% to 10% in the General Budget for FY11 released in late February. While the earlier price hike passed the increase in excise on to the consumer, the hike in diesel prices may too be soon factored in by cement makers.

The S&P CNX Nifty up 4.80 points or 0.09% to 5,133.70. The index touched a high and a low of 5,144 and 5,125.70, respectively.

The top gainers on the Nifty were RIL up 1.93%, BPCL up 1.87%, Sun Pharma up 1.57%, HCL Tech up 1.53% and L&T up 1.43%.

The top losers on the index were HDFC Bank down 2.10%, Bharti Airtel down 1.60%, JP Associates down 1.21%, ITC down 1.20% and ACC down 1.14%.

Asian markets are trading on a mixed note. Hang Seng declined 0.44%, Nikkei 225 shed 0.23%, NZX 50 down 0.72% and Seoul Composite shed 0.12%.

On the other hand, Straits Times advanced 0.27% and Taiwan Weighted gained 0.80%.

Financials, resources and industrials stocks are among the notable gainers in the Australian market. Stocks from various other sectors are also trading firm. The benchmark S&P/ASX 200 index is up 96.2 points or 2.1% at 4,664. The broader All Ordinaries index is currently trading at 4,683, up 92.4 points or 2% over its previous close.

On Tuesday, the S&P/ASX 200 index had ended up 22.3 points or 0.49% at 4,568, while the All Ordinaries index moved up 20.4 points or 0.45% to 4,591.

Among bank stocks, ANZ Bank is up 3.5%, National Australia Bank is trading higher by 3.3%, Westpac Banking Corporation is gaining about 2% and Commonwealth Bank of Australia is up with a gain of 2.5%. Macquarie Group is trading higher by 1.4%.

In the materials space, BHP Billiton is up 1.8%, Rio Tinto is gaining about 2.8% and Newcrest Mining is trading higher by 3.75%. Bluescope Steel, Orica, Incitec Pivot, Fortescue Metals and Lihir Gold are also trading notably higher.

Among energy stocks, Woodside Petroleum is up 1.6%, Santos is gaining 1.65%, Oil Search is up 2.2% and Origin Energy is trading stronger by about 2.5%.

Shares of Warrnambool Cheese & Butter Factory Co Holdings Ltd are up nearly 8% after the group received an improved takeover offer from Murray Goulburn Co-Operative Co Ltd. On Tuesday, WBC had reported a significant rise in first-half profit and said its outlook is positive.

Coffey International is down nearly 8% due to weak results. The global engineering and project management provider’s net profit fell 20% to A$10.85 million in the six months to December 31, from A$13.51 million in the prior corresponding half. Operating earnings before interest, tax, depreciation and amortization fell 14% to A$31.1 million. The company has blamed a strong Australian dollar exchange rate and the global financial crisis for the fall in its first-half profit.

On the economic front, an index measuring skilled job vacancies in Australia added 1.6% to 44.4 in February compared to the previous month, the Department of Employment and Workforce Relations said. That follows a 1.1% monthly increase in January.

Among the individual components, marketing and advertising positions jumped 9.9% on month, while metal trades and construction jobs also were sharply higher. The availability of health profession and accounting positions saw significant declines. By region, New South Wales, South Australia, Western Australia and Tasmania saw an increase in skilled vacancies, while Victoria, Queensland and the Northern Territory all saw declines.

A forward-looking index measuring the Australian economy added 1.3 points or 0.5% in December compared to the previous month, the Westpac/Melbourne Institute index revealed, coming in at 245.8. That follows the 1% monthly increase in November. On an annualized basis, the index jumped 6.2% after jumping 5.4% on year in the previous month. The survey also showed that the coincident index climbed 1 point or 0.4%.

In the currency market, the Australian dollar opened notably higher thanks to the positive close on Wall Street overnight. The Aussie was quoting at US$0.9008-US$0.9011 in early trades, up 0.85% from Tuesday’s close of US$0.8932-US$0.8937. The Australian dollar is currently trading at 0.9007 to the U.S. dollar.

The Japanese stock market is trading firm on Wednesday with investors picking up stocks cutting across various sectors.

The benchmark Nikkei 225 index, which rose to 10,258, was up 210.37 points or 2.1% at 10,245 at the end of the morning session.

The mood is so positive that just three stocks out of the 225-stock strong Nikkei 225 index are currently down in the red.

Automobile and banking stocks are mostly trading higher. Shares of securities firms, real estate companies and insurance firms are moving up. Manufacturing and electric power stocks are also gaining in strength.

Several stocks from machinery, services and communications sections are trading with notable gains. Paper stocks Nippon Paper Group and Oji Paper Co. are trading lower due to rating downgrades.

Shares of Toshiba Corp. moved up sharply following reports the U.S. government will promote domestic construction of nuclear power plants.

After opening higher thanks to a positive close on Wall Street overnight, Toyota Motor shares have drifted down into negative territory on recall concerns.

Pacific Metals, Japan Steel, Sumitomo Metal Industries, Mitsui Minerals and Nippon Steel are trading sharply higher.

Mitsui & Co shares are up sharply following an announcement by the company that it will participate in a project to develop shale natural gas in the U.S state of Pennsylvania.

Mitsui OSK Lines, Toshiba Corp., Canon, Fujitsu, Shinsei Bank, Honda Motor are also trading with impressive gains.

On the economic front, an index measuring the activity of tertiary industries in Japan was down 0.9% in December compared to the previous month, the Ministry of Economy, Trade and Industry said on Wednesday. That was sharply lower than analyst forecasts for a decline of 0.2% on month, which was also the same rate of decline in November. For the third quarter of 2009, the index was down 0.2% compared to the previous three months.

In the currency market, the U.S. dollar traded in the lower 90-yen level in early deals in Tokyo. The yen is currently trading at 90.28 to the U.S. dollar.

Bank and technology stocks are among the top gainers in the South Korean market. Steel, oil and telecom stocks are also trading firm.

The benchmark KOSPI index, is trading at 1,627, up nearly 26 points or 1.62%, over its previous close.

Among bank stocks, Korea Exchange Bank, Woori Finance and Shinhan Financial are trading higher by 2%-2.5%, while KB Financial is up sharply by about 4%.

In the technology space, heavyweight Samsung Electronics is gaining about 2.2%, LG Display LCD is up 2.8% and Hynix Semiconductor is trading higher by 4.5%. LG Electronics, which is a bit subdued, is up with a modest gain of 0.5%.

Steel stocks Hyundai Steel and POSCO are up 1.2% and 1% respectively. Among Oil stocks, SK Holdings is trading 2.1% up and S-Oil is gaining about 1%. KEPCO is up with a gain of 1.2%.

Among shipping stocks, Hyundai Heavy Industries, Samsung Heavy Industries and Daewoo Shipbuilding are up with modest gains, while STX Pan Ocean is down in negative territory with a loss of 3.3%.

Telecom stocks SK Telecom and KT Corp are up 1.8% and 2% respectively. Automobile and airlines stocks are trading mixed.

Among other markets in the Asia-Pacific region, Hong Kong and Singapore are trading notably higher. Indonesia, Malaysia and New Zealand are also trading firm. Markets across the region closed higher on Tuesday. Chinese markets are closed this week due to a holiday.

On Wall Street, stocks rallied by sizable margins on Tuesday, as data showing a notable improvement in New York State manufacturing and a batch of upbeat earnings reports drove markets higher on the day. The major averages all closed in positive territory, building on last week’s gains.

The 30-share BSE Sensex zoomed 227.61 points or 1.40% to 16,454.29. The index touched a high and a low of 16,457.11 and 16,228.91, respectively.

The BSE Mid-cap and Small-cap indices gained 1.31% and 1.20%, respectively.
In the BSE sectoral space the main gainers were, Metal up 2.92%, Consumer Durables (CD) up 1.90%, Realty up 1.76%, Capital Goods (CG) up 1.57% and Bankex up 1.51%.

There were no losers in the BSE sectoral space.
Meanwhile, the chairman of Prime Minister’s Economic Advisory Council (EAC) C Rangarajan, on Tuesday, said that India should move towards the path of fiscal consolidation as the economic growth was resuming.

Rangarajan said that the process of fiscal consolidation must begin now as the economy was picking up again while the fiscal deficit, at the level it currently is, will be unsustainable in the long run. Hit first by the global commodity rally and then the recession in advanced economies following the events of September 2008, the Indian government was forced to take expansionary fiscal policies which pushed the deficit to a 16 year high of 6.8% in FY10.

Tata Steel up 4.35%, Hindalco Inds up 4.27%, Sterlite Inds up 3.23%, L&T up 2.23% and Tata Power up 2.13% were the major gainers on the Sensex.

There were no losers on the benchmark index.
The Indian government said on Tuesday that all the hurdles in the way of the much-awaited auction of third generation (3G) radio spectrum had been cleared, although there was yet no clarity regarding the possible timing of the event. The auction has been delayed thrice owing to differences between telecom and defence establishments on availability of spectrum.

But union communications minister said that the Ministry was yet to receive directions from the Law Ministry as well as the Finance Ministry. ‘There is no clarity yet. I am waiting for directions from the Finance Ministry and the Law Ministry and have not got any from them,’ said A Raja.

The S&P CNX Nifty soared 1.44% to 4925.45 from its previous close of 4855.75. The index touched a high and a low of 4926 and 4857.60, respectively.

Tata Steel up 4.43%, Hindalco Inds up 4.33%, Sterlite Inds up 3.38%, Tata Power up 2.62% and L&T up 2.33% were the top gainers on the Nifty.

While Idea down 0.09% and Hero Honda down 0.08% were the only losers on the broadly followed index.

Among Asian markets, Hang Seng advanced 1.77%, Jakarta Composite rose 0.67%, KLSE Composite added 0.84%, Nikkei 225 surged 2.57%, Straits Times gained 1.10% and Seoul Composite soared 1.66% and.

The BSE Sensex was up 10.20 points or 0.06% at 17,550.49, with the intraday high and low of 17,776.57 and 17,529.89 respectively.

The BSE Mid-cap and Small-cap indices were up by 0.91% and 1.79% respectively.

Among the sectoral indices, Realty up 2.62%, PSU up 0.87%, Metal up 0.87%, Auto up 0.83% and TECk up 0.78% were the major gainers.

On the other hand, Oil & Gas down 0.78% was the only loser on the BSE sectoral space.

The major gainers on the Sensex were DLF up 2.64%, Jaiprakash Associates up 2.17%, Hero Honda up 1.76%, Maruti Suzuki up 1.76% and Grasim Industries up 1.47%.

RIL down 1.20%, BHEL down 1.19%, Hindalco Industries down 1.04%, Wipro down 0.89% and ICICI Bank down 0.36% were the top losers on the benchmark index.

The government has ruled out any plans to merge BSNL (Bharat Sanchar Nigam) and MTNL (Mahanagar Telephone Nigam). Speculation were rife on this matter on the backdrop of the two PSUs (Public Sector Undertakings) registering persistent losses. However, the Centre is mulling to sell part of its stake in BSNL and is likely to proceed further in this regard very soon.

In a move aimed at pushing the consolidation in the Indian banking industry, the finance ministry is likely to appoint private consultancy firms to help guide the large public sector banks on their way to acquire the smaller ones. The finance ministry earlier had an informal meeting with five of the biggest banks to discuss the agenda of consolidation where bankers were urged to explore various avenues for consolidation and come up with a roadmap whenever they felt comfortable. While the bigger banks have been working in this direction, the progress has been slow.

The 50-share S&P CNX Nifty was up by 9.85 points or 0.19% to 5254.60 from the previous close of 5244.75 with an intra day high and low of 5287.20 and 5227.80, respectively.

The top gainers on the Nifty were Unitech up 4.21%, ABB up 3.36%, PNB up 3.10%, Axis Bank up 3.06% and DLF up 2.78%.

On the other hand, the top losers were Cairn down 1.75%, BHEL down 1.34%, RIL 1.31%, Hindalco down 1.01% and Power Grid down 0.86%.

The government on Saturday approved six road projects involving an investment worth Rs 6,150 crore for widening highways in the western region of the country. The projects that were cleared by the Cabinet Committee on Economic Affairs include six laning of the existing four lane sections under NHDP Phase-V programme in the states of Gujarat, Maharashtra and Rajasthan. Various stretches that would be covered under the scheme include 140.35 Km. long Pune-Satara Section in Maharashtra on NH-4, 56.16 Km. long Samakhiali-Gandhidham Section in Gujarat on NH-8A, and 242.51 Km. long Udaipur-Ahmedabad Section in Rajasthan & Gujarat on NH-8.

India is likely to come out with a new manufacturing policy by June this year to promote investment in the industry. The share of the manufacturing sector in the gross domestic product of the country has gone down in the current decade as services sector has been registering much faster growth.

Prime Minister Manmohan Singh has said that the government will address the bottlenecks in infrastructure to keep up the economic growth on a higher trajectory. Indian policy makers have been criticised often in the past for not giving the required attention to infrastructure which results in unnecessary wastage of resources and imposes lower efficiency on business processes.

Asian markets were trading mostly in the positive terrain. Jakarta Composite added 0.68%, Taiwan Weighted climbed 0.52%, Hang Seng rose 0.51%, Shanghai Composite gained 0.45% and Straits Times advanced 0.40%.

On the other hand, NZX 50 plunged 0.20% and Seoul Composite declined 0.07%.

The BSE Sensex was trading at 17,044.25, down by 53.30 points or 0.31% after touching a high and low of 17,200.47 and 17,044.25 respectively. There were 13 advances against 17 declines on the index.

The overall market breadth has turned in the favour of declines with 40.40% stocks advancing against 56.32% declines. Though the broader indices too have pared gain but are still performing better than the benchmarks. The BSE mid cap index was down by 0.13% while the BSE Small cap index was marginally by 0.07%.

The top gaining sectors of the BSE were HC up by 0.95%, FMCG up by 0.71%, Metal up by 0.39% and IT up by 0.26%.

The top loosing sectoral indices were Bankex down by 1.39%, PSU down by 0.82%, Auto 0.71%, Power down by 0.39% and CD down by 0.31%.

The top gainers of the Sensex were M&M up by 1.88%, Hindalco up by 1.86%, Tata Steel up by 1.71%, ITC up by 1.65% and HUL was up by 1.01%.

The top losers of the index were RCom down by 2.04%, SBI down by 1.57%, HDFC Bank down by 1.26%, Tata Power down by 1.24% and Maruti Suzuki was down by 1.23%.

The government said on Monday that the total sovereign expenditure in the current fiscal year will not exceed the budgeted level. Union Finance Minister Pranab Mukherjee said in the Parliament that total spending will remain at Rs 10.2 lakh crore as was given in the union budget for FY10 presented in July.

Mr Mukherjee also added that the fiscal deficit in current financial year would not exceed the budgeted target. The finance ministry had targeted fiscal deficit at 6.8% of the estimated gross domestic product in FY10. However, the government has recently sought the nod for spending nearly Rs 30,000 crore. This has raised the concerns that total expenditure over the fiscal would exceed that mentioned in the budget and thus would lead to rise in deficit.

The finance minister was answering a query in the Parliament on government’s plan of spending extra money without increasing its planned borrowing. Mukherjee had said earlier that the excess expenditure would be balanced either by savings from some other heads of expenditure or by increasing the revenue by corresponding amount. Indian government is running a record high deficit in the current fiscal, highest in 16 year. While the budgeted level of gap between revenue and expenditure of the union government is 6.8%, the actual figure after accommodating states deficit at 4% and off-budget items like fuel and food subsidies, total deficit would touch close to 11.5%.

The S&P CNX Nifty was trading at 5087.00, down by 18.70 points or 0.37% from its previous closing of 5105.70 and has touched a high and low of 5129.45 and 5086.15 respectively. There were 20 advances against 29 declines while 1 stock remained unchanged.

The top gainers of the Nifty were Cipla up by 2.05%, Hindalco up by 1.39%, Tata Steel up by 1.14%, M&M was up by 1.07% and Siemens was up by 1.05%.

The top losers of the index were IDFC down by 3.22%, RCom down by 2.68%, Maruti Suzuki down by 2.14%, SBI down by 1.82% and Idea was down by 1.80%.

The Asian markets are trading in red with some of the indices gaining strength with some plunging further in red. Shanghai Composite was trading at 3,275.98, down by 26.92 points or 0.82%, Hang Seng was trading at 21,860.34, down by 225.41 points or 1.02%, Jakarta Composite was trading at 2,484.99, down by 21.39 points or 0.91% and Nikkei 225 was trading at 10,083.48, down by 22.20 points or 0.22%.

On the other hand Straits Times was trading at 2,802.68, up by 3.14 points or 0.11% and the Seoul Composite was trading at 1,665.85, marginally up by 1.08 points or 0.06%.

The US markets closed modestly higher on Monday on the back of easing global debt concern as Abu Dhabi extended 10 billion as bail out financing to enable Dubai to settle Islamic bond. There were other good news from domestic front; Citigroup Inc. said it would pay back $20 billion in bailout money it received as part of the government’s financial rescue program. The government will also sell its 34% stake in the company; also Exxon Mobil Corp. announced its acquisition of XTO Energy, which sent energy stocks sharply higher. The dollar fell against other currencies, helping to lift commodities prices.

The Dow Jones industrial average was up by 29.55 points, or 0.28%, to 10,501.05, its highest close since October 1, 2008. The broader S&P 500 index added 7.70 points, or 0.70%, to 1,114.11, its highest finish since October 2, 2008 while the Nasdaq composite index gained 21.79 points, or 0.99%, to close at 2,212.10.

The decline in crude prices continued for the ninth consecutive day and during the trade went below $68 per barrel on persistent concerns about high inventories and weak demand. Crude supplies in the US have surged six out of the past 10 weeks as the refiners kept cutting back on production. This is the longest losing streak for US crude futures since July 2001.

Benchmark crude for January delivery fell 36 cents to settle at $69.51 on the New York Mercantile Exchange. In London, Brent crude for January delivery gained a penny to settle at $71.89 on the ICE Futures exchange.

You should be aware of the power of crude oil in the global economy. Crude oil trades around the world. Crude oil is one of the most heavily traded commodities in the world. Every day perhaps billions of dollars worth of crude oil gets traded. You must be thinking that crude oil contracts get traded between the oil producing countries like Saudi Arabia, Russia, Nigeria and so on with non oil countries. Now to your surprise, New York Mercantile Exchange (NYMEX) is considered to be the hub of crude oil trading in the world.

At NYMEX, crude oil futures contracts based on Dubai Crude Oil, Brent North Sea Crude Oil, differential between the light sweet crude oil and the four domestic grades of crude oil as well as oil options are traded.

The NYMEX contract for the light sweet crude is the most liquid of all the crude oil contracts. A standard crude oil contract is based on 1,000 barrels of crude oil that will be delivered to Cushing Oklahoma. The E-mini crude oil contract trades on the Chicago Mercantile Exchange (CME) GLOBEX platform and is cleared at NYMEX. It is based on 500 barrels of crude oil.

The NYMEX contract for the light sweet crude is the most liquid of all the crude oil contracts. A standard crude oil contract is based on 1,000 barrels of crude oil that will be delivered to Cushing Oklahoma if not settled in cash before the expiry of the contract. The E-mini crude oil contract trades on the Chicago Mercantile Exchange (CME) GLOBEX platform and is cleared at NYMEX. It is based on 500 barrels of crude oil. Now as a retail trader, you can trade the E-Mini crude oil contract. If you have been dabbling into futures trading than you must know that futures trading is risky and can easily wipe out the capital in your trading account in a matter of minutes. So what to do? One and easy option is to stay away from the crude oil futures trading. The more difficult option is to first learn futures trading do some paper trading and only then venture into this difficult proposition. Read the whole article, I will give you a very good solution at the end.

Open outcry trading takes place between 10: 00 AM EST to 2:30 PM EST. After hour trading takes place on NYMEX ACCESSS system, an internet based trading platform starting at 3:15 PM EST Monday through Thursday and ending at 9:30 AM EST the following day. Sunday trading starts at 6:00 PM EST.

You can visit the website of NYMEX and read a more about the crude oil trading that takes place at that exchange. Now trading crude oil futures contracts require you to be in tune with the market sentiment. Trends in crude oil market don’t develop suddenly and they don’t reverse suddenly. This is something good for you as a crude oil futures trader.

When a trend in the crude oil market develops, it may last for a few months to a year. It all depends on the global supply and demand situation of the crude oil. If you can spot a trend in the crude oil market in its early stage and ride it till its reversal, you can make a good profit. Now, just keep this in mind that crude oil prices are highly susceptible to global geopolitical situation and react violently to any political global uncertainty. As a crude oil futures trader you will need to know how to handle the seasonal cycle in the oil market as well as the weekly cycle. Now every week usually on Wednesday the American Petroleum Institute (API) and the US Energy Information Agency (EIA) releases their weekly supply data reports. If you want to trade crude oil futures than you should know Mark Soberman! What you need to do is click on the link on the left that says FREE EVIL GENIUS TRADING KIT. This trading kit is from Mark Soberman. Don’t worry its 100% safe and legal. You only need to come out of your comfort zone. Download the free kit and find a unique method to trade the crude oil futures!

The credit crisis proved to be a major shock for the financial markets, sending institutional investors into a strong risk-aversion mode. This was reflected directly in the Treasury market, where investors bought the safety of the debt market, while shorting risky assets such equities and commodities.

With investors rallying into the Treasury market, the yield on the government debt fell to record low levels during the credit crisis, mainly during the last quarter of 2008.

Since then, the market has gradually returned to risk-tolerance, which means that investors are looking for higher yielding assets instead of the safety assets. These days, the VIX index is returning to the pre-credit crisis levels, while equity and commodity markets are surging towards yearly highs, suggesting investors confidence is high.

It seems that risk-tolerance does not mean anything at all for the Treasury market, since the debt market has continued to trade within the same tight range over the last half of year. This was best seen in the short maturity bill market, where the market is trading close to the 0.0% benchmark level.

Right now, the U.S. government pays a 0.1% yield for a 3-month loan, while for a 12-month loan pays 0.30%.

In other words, the Government pays $5000 for every $1 million that it borrows with a 3-month maturity, which is probably one of the best deals of the last few centuries. Making the matter even more ironic is that during the prior week the yield on the 3-month bill fell into negative territory in intra-day trading, meaning that the market was willing to pay an interest rate charge to lend money to the U.S. Government.

The last time that short-term yields fell into negative territory was after Lehman’s bankruptcy, in December 2008. All this points to something being wrong at one of the two ends of the interest rate equation. Either, the Treasury market is following the wrong event – most market participants say that the Fed’s pledge to maintain low interest rates low for a long period influenced the debt market or that the equity and commodity markets are deeply overvalued.

Either way the story goes, two points are clear: the economy is recovering, thus pointing to higher yields, while the FOMC rates cannot go any lower from where they are currently standing; yet again pointing to higher yields.

Maybe the dollar will find buyers after all, as the market starts to price in global interest rate increases from most central banks, only to realize that the U.S. yields are already up there with the top end of the market, in real terms.