Last week was all about some ruminations about demonetisation undertaken by the Reserve Bank of India at the direction of Prime Minister Narendra Modi in 2016.

Friday, the central bank said it was pulling out 2,000-rupee notes and citizens have time till September 30, 2023, to deposit this high-value currency into their bank accounts.

There were memes and jokes all around on social media after the central bank issued a circular to this effect as people remembered demonetisation with mixed emotions.

But unlike the 2016 demonetisation, which outlawed 1,000 rupees and 500 rupees notes abruptly, the process of withdrawal of the 2,000-rupee note is expected to be orderly.

The week was also mixed for markets, with the US central bank officials continuing to sound hawkish and the US politicians unable to find a quick solution to the issue of debt ceiling.

Friday, Republican politicians walked out of negotiations saying the White House was not being reasonable.

But late Friday, Fed Chairman Jerome Powell suggested that Fed could afford to wait to study data. Markets have taken this to mean that Fed could pause in June. Powell's comments were not in line with remarks made by some of his colleagues earlier this week as they had sounded more hawkish.

The 10-year U.S. yield had risen by 25 bps in the last five sessions to trade near 3.65% due to the comments by the Fed officials.

Indian Markets Last Week:

Stocks ended higher on Friday, snapping a three-day losing streak. The move followed a rise in shares globally on hopes that the deadlock of the debt ceiling will end in the US. The week had earlier seen profit sales dragging the indices down. Although shares rose on Friday, they were lower for the week. Foreign funds continued to buy shares.

Government bond yields rose on Friday, with the 10-year rising again to 7% after the RBI set a dividend pay-out that was lower than market expectations. The RBI said it will make a surplus transfer of ₹874.1 billion. The market had expected the figure to be over ₹1 trillion. A high dividend could have helped the government trim its market borrowing.

The rupee fell on Friday, weighed down by the rise in the dollar globally in the hopes of a resolution to the political impasse over raising the US debt ceiling. The dollar hit an 8-week high mostly for its safe-haven appeal.

Global Markets Last Week:

Fed Chair Powell said the stance of policy is restrictive, and the central bank faces uncertainty about the lagged effects of tightening so far and about the extent of credit tightening from recent banking stresses.

"Having come this far, we can afford to look at the data and the evolving outlook to make careful assessments," he said.

The rate futures market has priced a roughly 16% chance that the Fed raises the benchmark rate at its June meeting by 25 basis points. The rate-hike bet was nearly 40% before Powell spoke.

US Stocks fell, weighed down by worries over the debt-ceiling deadline and concerns that more mergers involving regional banks may be needed. Treasury Secretary Janet Yellen told the chiefs of large banks that more mergers may be needed. The major stocks indices managed to close the week higher.

In a choppy week for trading, US treasury yields rose from the day's lows to close higher. Market-friendly comments from Powell were overshadowed by concerns about the impasse over debt ceiling negotiations and the prospects for regional and smaller banks.

For the week, the dollar was higher than its peers. The dollar index settled at 103.08, after hitting a seven-week peak earlier last week. The market expected Powell to be hawkish and his dovish comments forced traders to square off some of the long positions.

Corporate Bonds

Bond Issuances Of The Past Week

• SIDBI raised ₹50 billion via 3-year 3-months bonds at 7.43%.
• LIC Housing Finance raised ₹49.60 billion via 119-month NCDs at 7.67%.
• HDFC raised ₹30 billion via 60-month NCDs at 7.70%.
• Power Finance Corp raised ₹29.90 billion via 36-month bonds at 7.37%.
• Rural Electrification Corp raised ₹20 billion via reissue of 82-month bonds at price of ₹102.51.
• Rural Electrification Corp raised ₹20 billion via reissue of 106-month bonds at price of ₹97.02.
• LIC Housing Finance raised ₹10.40 billion via 60-month NCDs at 7.70%.
• Bajaj Finance raised ₹11.55 billion via reissue of 4-year 10-month NCDs at 7.77%.
• SBI Cards and Payments Services raised ₹8.10 billion via 60-month NCDs at 7.85%.
• Bajaj Finance raised ₹5 billion via 10-year NCDs at 7.72%.
• Fullerton India Home Finance raised ₹3.5 billion via 36-month NCDs at 8.35%.
• Kotak Mahindra Prime raised ₹3 billion via 3-year 1-month NCDs at 7.835%.
• John Deere Financial India raised ₹3 billion via 18-month NCDs at 8.10%.
• IIFL Samasta Finance raised ₹1.50 billion via 84-month NCDs at 11.00%.
• Mac Charles India raised ₹500 million via 2-year 2-months NCDs at 16.0%.
• Shriram Housing Finance raised ₹500 million via 10-year NCDs at 9.10%.
• Shrem Infrastructure raised ₹500 million via 2-year NCDs at 9.75%.

Secondary Market

Yield on 10-year corporate bonds were up 3-5 basis points, tracking movement in government bonds. Market participants lapped up fresh supply of bonds across tenures.

Outlook For This Week

Stocks are likely to stay soft in line with global trends till US lawmakers reach a solution on raising the debt ceiling for the US government. Government bond yields are likely to have a bias to weaken. Comments from Powell could reinforce expectations that yields in India and the US have peaked. Profit sales could limit the fall as the RBI dividend pay-out pledge has hurt sentiment. The rupee could strengthen, but RBI's intervention could limit the rise.

In Other News

• RBI to withdraw 2,000-rupee denomination banknotes from circulation.
• RBI board OKs transfer of 874.16-bln-rupee surplus to govt for FY23.
• PM says global headwinds pose challenges but India economy growing fast.
• Govt says no tax on international card spend up to 700,000 rupees per financial year.
• Can't conclude SEBI failed in Adani-Hindenburg case, says Sapre panel.
• Banks' deposits rise 10.42% YoY to ₹184.35 trln rupees as of May 5.
• Powell Says Bank Stress Could Influence Rate Path.
• JPMorgan investors to scrutinise First Republic takeover.
• Republicans say US debt-ceiling talks paused, White House says deal still possible.
• From sunglasses to milking machines, US halts more exports to Russia.
• London court throws out lawsuit against Google over medical records.
• Tesla stops short of committing to India plant in renewed talks.
• China's Xi meets central Asian leaders, calls for trade, energy development.
• Bezos' Blue Origin wins NASA contract to build astronaut lunar lander.

News Events This, Next Week

• May 22: Fed presidents Bullard, Daly, Bostic, Barkin speak at events.
• May 23: Dallas Fed president Logan speaks at an event.
• May 23: US Flash Services PMI.
• May 23: US Flash Manufacturing PMI.
• May 23: US New Residential Sales.
• May 24: Federal Open Market Committee meeting minutes published.
• May 24: Fed's Waller speaks.
• May 24: API Crude Oil Stock Change.
• May 25: OECD trade statistics release.
• May 25: US GDP second reading for Jan-Mar.
• May 25: Initial jobless claims for May 20.
• May 25: Richmond Fed president Barkin speaks at an event.
• May 25: Pending home sales for April.
• May 26: Personal Consumption Expenditure Index for April.
• May 31: GDP for Jan-Mar, by NSO.
• May 31: Provisional Annual Estimates of GDP for 2022-23 (Apr-Mar), by
• NSO.
• May 31: Government finances for 2022-23 (Apr-Mar), by CGA.
• May 31: Core sector output for April, by Office of the Economic Adviser.
• May 31: CPI for Industrial Workers for April, by Labour Bureau.