South Indian Beauty Sanjana

Greece and all things Eurozone were at the epicentre of markets this week. Who and how much should be stumped up to bail out the country as Eurostat said its 2009 budget deficit was higher than expected at 13.6% and ‘expressing a reservation on the quality of the data reported by Greece (which) …could lead to a revision…of the order of 0.3 to 0.5 percentage points of GDP’. On this Moody’s downgraded its sovereign rating one notch to A3, adding that unless markets calm down it was on review for a further possible downgrade; it upped Iceland’s outlook to ‘stable’. Ten-year benchmark government bond yields hit a record 9.13%, 608 basis points over Bund (low yield 3.02%), spreading the problem to Portugal among others whose debt also set a new record at 199 basis points over ten-year Bunds. Five-year Credit Default Swaps for this pair traded at new records, 650 and 270 basis points, the highest in Europe and comparable with Ukraine’s 553. The Irish government debt ratio was also revised up, to 14.3%, on reclassification of bank rescues and stands at 6.3% across EZ16 (6.8% for EU27). Britain’s record £163B deficit for 2009/2010 is 11.5% of GDP, a peacetime record. Fitch Ratings warned that Japan’s creditworthiness was at risk from rising government debt, gross debt running at a record 201% of GDP.
The Reserve Bank of India raised their key lending rate by 25 basis points to 5.25%, and the reserve ratio to 6%, to try and tame inflation. March’s WPI is running at +9.9% Y/Y while food was +16.65% versus February’s annual rate of +17.79%. Worries that if this year’s monsoon is as bad as last year’s agriculture will be hard hit indeed. UK March CPI is also higher than expected, +3.4% Y/Y, thoughts a rate hike might be needed buoying the pound this week.