02.11.2008

• RBI acts again to increase liquidity
• Repo rate cut by 50bps to 7.5%. CRR cut by 1% to 5.5%. A new 7.5% 90-day refinance window for banks opened.
• Put together these measures are expected to infuse about Rs. 1,60,000 crores into the system.
  
• To ensure that the government borrowing does not hurt the financial system, the RBI has decided to use money impounded under the market stabilisation scheme for government borrowing.
• The present cut in CRR takes the total cut in CRR to 2.5% in the month of October alone. While the RBI cited global liquidity crisis and the flight of FIIs as reasons, concerns are alredy being raised about their impact on inflation, which has just started showing signs of improvement.
• These are really tough times and tough times call for action. Let us hope they will not allow inflation to rise again.
• A very good briefing on recession.
• It is a primer which gives an excellent understanding of the phenomenon. Read it here.
• We keep reading or hearing about G-Secs; don't we? They stand for Government Securities. Also referred to losely as gilts. Look at the types of G-Secs that are there:
• Zero coupon bonds Bonds that do not pay any interest but are instead issued at a deep discount to the maturity value and then can be redeemed at par by the investor. (See the clarification given by cvrk that is posted below as comment by me.)
  
• Dated securities These generally carry fixed interest rate and are fixed maturity securities. Mostly carry semi-annual coupon
  
• Partly paid stock Stocks where investors are not required to pay the full contractual amount and payment of principal amount is made in installments over a given time frame
  
• Floating rate bonds Bonds that have variable interest rate with a fixed % pegged over a benchmark rate. There may be a cap and a floor rate attached thereby fixing a maximum and minimum interest rate payable on it
  
• Bonds with call/put option Bonds in which bond holders have the option of selling (put option) the bond to the government or the government has the option of buying back (call option) the bond from the holder, even before it is due for redemption
  
• Capital indexed bonds Bonds where interest rate is a fixed as a % over the wholesale price index and hence is an efficient hedge against inflation
• A note on Marathon running
• Marathon is named after the fabled run of the Greek soldier Pheidippides, a messenger from the Battle of Marathon to Athens.
  
• The legend states that he was sent from the town of Marathon to Athens to announce that the Persians had been defeated in the Battle of Marathon. It is said that he ran the entire distance without stopping and burst into the assembly, exclaiming ‘Nenikékamen, meaning ‘We have won.’, before collapsing and dying.
• When the idea of a modern Olympics became a reality at the end of the 18th century, the initiators and organizers were looking for a great popularising event, recalling the ancient glory of Greece. The idea of organising a marathon race came from Michel Breal, who wanted the event to feature in the first modern Olympic Games in 1896 in Athens.
  
• The Greeks staged a selection race for the Olympic marathon, and this first marathon was won by Charilaos Vasilakos in 3 hours and 18 minutes.
  
• The winner of the first Olympic Marathon in 1896 (a male-only race) was Spiridon “Spiros” Louis, a Greek watercarrier who completed it in 2:58:50.
  
• The women’s marathon was introduced at the 1984 Summer Olympic in Los Angeles and was won by Joan Benoit of the US with a time of 2:24:52.
• In the last couple of days I have answered some of the shout-box queries by posting in Discover-It blog:
• I have tried to explain the similarities and differences between the way the US Fed announces its rates and what our RBI does in "Interest rates and reserve requirements"
• Then in "Education as fundamental right" I explained why an Act of Parliament is still needed in spite of there being the 86th Amendment.
• "On subprime loans and securitization" explains what are subprime loans and also the concept of securitization.
• I have also explained about MSS - Market Stabilization Scheme.