RBI is playing with FIRE abt intervention in the FWD USDINR market…. Your sins with come back to haunt you … unlike Equities which can be manipulated for years, you can’t do that same with FX and RATES
@RBI EXTENT Of Forward Intervention is #MindBoggling in one #CHART. You can see INR 2yr & 3yr Implied Forward Premium is 7.8% & 7.59% Respectively
& has Actually Increased while the near term 12 Month INR forward is just 2.5%. This kind of DIVERGENCE is SCARY.#RETWEET #MUSTREAD Image
This is called Timing !!

My tweet was at 1.26pm IST. See the INTRADAY on the INR today … the breakdown happens at 1.57pm IST

I guess I was just lucky I guess since there was NO MOVEMENT in the DXY or regional currencies like the JPY (see Intraday Charts of JPY, INR, DXY) ImageImage
AN UPDATE ON THE #INR #USDINR. DANGEROUS GAME!!
@SaurabhDJosh pointed out that INR onshore 12mth fwd has fallen to just 2.18%.... the only last time this happened was in May 2010 and Sep-2011. In both these scenarios, Off-shore NDF 12 mth fwd Prems also contracted along onshore Image
But this time, as you can see, the ONSHORE 12 mth USDINR fwd is contracting (2.18%) while the Off-shore NDF 12 month fwd is expanding to 2013 #TaperTantrum levels (8.2%).

Why is this dangerous? IF I WERE an importer, RBI has effectively made my 12 month fwd IMPORTS super cheap Image
As an importer, I would be signing on more such IMPORT CONTRACTS & promise to pay the exporter over that time frame of 12 months. EFFECTIVELY, RBI is encouraging more & MORE IMPORTS over the next 12 mths when it should be encouraging the opposite "Making Imports expensive" Image
Meanwhile, EXPORTERS will be encouraged NOT TO HEDGE making the entire market very very illiquid.

@RBI in my view is playing a very dangerous game. Its run out of bullets and BUYING TIME. Its providing Speculators a reason to USE #INR as the #CARRYTRADE. 🤔 Image
Something will SNAP... if @RBI wins, then INR will rally like a coiled spring. But if @RBI loses, the INR will just crash.

ITS IMPORTANT that FX Speculators start viewing #Indias Disclosed FX RESERVES with a pinch of Salt. They have to ADJUST this with the FX Forwards.

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More from @TheFactFindr

Oct 21
Have Emerging Market ETF Sell-off started? In a thread on Interest Rates driving Asset Allocation, made a point that EMs would witness outflows given FX Risk. ETFs would be first LIQUID Assets to be Unwound... Has that Happened ? Lets Looks at some Large EM ETFs
Biggest of them all: The Vanguard $63bn Emerging Market ETF.... There has been ZERO FALL IN ETF units outstanding .... Image
Next Comes the Blackrock $20bn iShares EM Fund. This has already started seeing outflows... Image
Read 5 tweets
Oct 21
#MustRead #NIFTY #CostOfCapital
How Does #Rising #InterestRates/ #CostOfCapital/#DiscountingRate Impact Stock #Valuations. A STUDY of large Cap INDIAN Stocks
A long THEAD, pls stay with me...Exercise Shows a #StockWise Impact of Higher Discounting Rates & Implied Long Term Growth
Exercise based on Div Discounting Model (DDM) for Current GSEC vs 8.5% GSEC (Every Justification for it to be 9%).
Starting with #Reliance
Tab 1: Stk px implies 14% CAGR LT Growth (8yr + 8yr) @ 7.45% GSEC
Tab 2: Same Growth (14% CAGR) @ 8.55% GSEC
=>18% Lower Fair Value(Rs2062) ImageImage
Higher Global Interest Rates to counter Inflation => lower Growth. Past 11yrs, High Growth & Low Interest Rate Environment, RIL growth: Revenues ($ linked) at 9.2% CAGR & EPS at 9% CAGR over FY11-22... So Assuming EPS growth @ 14% CAGR in prev tweet is AGGRESSIVE Image
Read 9 tweets
Oct 20
Japan: BOJ is holding to its commitment of keeping 10yr yield ~0.25% with an unscheduled round of purchases.

But that hasn’t stopped the yield curve from steepening at the very long end.

Moreover, JGB 10yr futures have slipped to the lowest levels since Sept
Maybe the BOJ will consider tweaking its yield curve control if the 30-year yield reaches 2% -- which could be a matter of a few months if the current pace of ascent is maintained.
Meanwhile on the JPY, Investors with negative gamma positions related to Thursday’s expiration of $2.77b at strike 148.00 will be hoping BOJ does not intervene today to prop up the yen.
Read 4 tweets
Oct 19
1/n #RED #ALERT !! This has to REACH MAXIMUM people so people #RETWEET. You will Understand ONLY when you have read it. I have been talking about the Impact of Interest Rates on #AssetAllocation. There could be NOBODY ELSE world-over who understands this, better than #LarryFink Image
2/n In response to a question potential for client rebalancing into fixed income just as rates and markets eventually stabilize.

ANSWER: “Traditional 60-40 allocations are certainly at a balance, and portfolio liquidity profiles have also been impacted.”
3/n “for the first time in years, investors can actually earn very attractive yields without taking much duration or credit risk. Just a year ago, the U.S. two-year treasury notes were yielding 25 basis points”
Read 16 tweets
Oct 19
#EU #NATURALGAS: #OUTRAGEOUS Forecast …. Can #NaturalGas in the Europe Spot Market #CRASH TO #ZERO !!

Here is the thing, There are more than 35 LNG-laden vessels drifting off Spain & around the Mediterranean, with at least 8 vessels anchored off Bay of Cadiz. Why ?
Europe's lack of "regasification" capacity since all these years they were depending on pipelines and not LNG which is liquid cooled. HOW BAD? “declaration of exceptional operational situation", Spain's national gas grid operator Enagas said it may have to reject unloads of LNG
Floating storage levels in LNG shipping is at all time high levels with slightly more than 2.5million tonnes tied up in floating storage. These guys are speculators holding cargo as well.

However..While Day Head Power has fallen, but Month Ahead has crashed to <30…
Read 4 tweets
Oct 19
LET ME EXPLAIN the disconnect.

The reason you see this disconnect is coz your not looking at the FX Forward Premium Collapse and the run down in FX ….. providing a decent Arbitrage opportunity
Attached is the 12 Month Fwd Premium for the USDINR. It’s just at 2.5%. What INDIA 10yr GSEC yield ? 7.43%

What’s US 10yr? 4.03%. I can hedge my USD for 1yr at just 2.5% and capture $ 5% YTM on the India GSEC.
Besides that, We know that India TAX collections are Buoyant and GOVT is sitting on atleast Rs0.8 Trillion of UNUSED Budget for FY23 and

FURTHER non-excise tax collections, before devolution to the states, to exceed the estimated budget estimates by Rs3-3.5 Trillion
Read 4 tweets

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