India is considering simplifying the allocations of government debt limits to foreign investors, including doing away with the current system of auctions, said a source with direct knowledge of the deliberations between the government and regulators.

Among the measures being considered is making government debt limits available on a first come, first serve basis for foreign investors, instead of the current system of selling these at monthly auctions.

India is considering the measures after foreign funds have been net sellers in government debt over 14 successive sessions, selling over $3.2 billion. The sell-off has been a key reason behind the slump in the rupee to record lows this week.

India has taken a slew of measures to attract foreign investors into debt this year, including cutting taxes on interest income and raising the amount of debt they can buy.

The country has already shifted to a first come first serve basis of selling corporate debt limits earlier this year.

Tokyo stocks finished lower Tuesday as the Bank of Japan refrained from taking new measures to ease bond market volatility, generating a sense of disappointment.

The 225-issue Nikkei Stock Average closed down 196.58 points, or 1.45 percent, from Monday at 13,317.62, after sliding to as low as 13,296.31. The broader Topix index of all First Section issues on the Tokyo Stock Exchange was down 10.82 points, or 0.97 percent, at 1,101.15.

Decliners were led by real estate and consumer finance and steel makers, while gainers included paper, construction and securities firms.

India’s finance ministry, the central bank and market regulators on Monday discussed loosening rules for investment by foreign sovereign wealth funds in response to a sharply falling rupee and a wide current account deficit that are hurting the economy.

Two senior ministry officials, who declined to be named, said the aim was to attract more capital flows from wealth funds in Middle East countries. Finance Minister P Chidambaram has visited the Middle East in recent months to drum up investment.

“We will again meet and it will take some more time to finalize measures on sovereign funds,” said one official who attended the meeting.

Earlier this month, when the Reserve Bank of India (RBI) indicated that a cut in policy rates could be the last in a series of four cuts since April 2012, it set off alarm bells for industry, which has not been happy despite a 7.25 per cent repurchase (repo) rate, the lowest since May 2011. In fact, the central bank has often been criticised by the government and industry for its conservative approach in easing interest rates on grounds that high rates are responsible for stalled investments and, therefore, growth. Is this criticism warranted?

Things turned sour late last year when Finance Minister P Chidambaram openly remarked: “If the government has to walk alone to face the challenge of growth, well, we will walk alone.” The statement came after RBI Governor Duvvuri Subbarao, in his policy review on October 30, 2012, cut the cash reserve ratio from 4.5 per cent to 4.25 per cent but resisted pressure to cut the repo rate, which is the rate at which banks access funds from the central bank. Just a day earlier, the finance minister had outlined a fiscal consolidation map and indicated that he expected the RBI to ease interest rates. >> Read More

 India Ratings & Research (Ind-Ra) believes the cash generation ability of BSE 500 corporates, which ultimately determines their ability to service debt, has deteriorated and at a pace faster than what the EBITDA margin drop indicates.

While the rate of EBITDA margin deterioration has slowed down as per the latest available financial numbers, limited comfort may be drawn from cash-based margin measures such as fund from operations (FFO) and cash flow from operations (CFO) margins continuing to show a steeper deterioration since 2010. This clearly implies that the revenue growth and EBITDA margins were at the expense of higher level of working capital reflected in the credit growth trend of banks.  >> Read More

The future of the ambitious recommendations by the C Rangarajan Committee on doubling of domestic gas prices seems to be heading towards uncertainty as amid opposition from the Power Ministry along with the Planning Commission, the Petroleum Ministry has now asked the recently formed Vijay Kelkar panel to review the pricing formula.

Resultantly the meeting of the empowered Group of Ministers (eGoM), which was supposed to take a final call on the Rangarajan Committee’s recommendations on May 8, has now been indefinitely postponed, till the Kelkar panel comes up with its views on it.

Also the Kelkar panel, which was formed in March this year by the Petroleum Ministry to enlist measures for enhancing production of oil and gas in the country, has been asked by the nodal ministry, according to sources close to the development, to take a view on the formula suggested by the Rangarajan panel and inform whether it would be beneficial for the sector or not in the long run.

The Kelkar panel, headed by former Finance Secretary Vijay Kelkar, has been asked to give its views on Rangarajan panel’s recommendations within six months, though sources said that this could be preponed, considering the urgency of the matter. Even the Finance Ministry had earlier objected to the gas pricing formula on technical grounds. >> Read More

While the ECB’s refinancing rate cut of 25 bps was very much expected, and just took place pushing the main refi rate to a record low 0.50% (because more liquidity is just what Europe’s collapsing economy needs), what was unanticipated was that the Marginal Lending Facility (which last time we checked was used by pretty much nobody) was also cut, from 1.5% to 1.0%. The deposit rate, at 0.00%, was obviously left unchanged.

From the ECB:

 

At today’s meeting, which was held in Bratislava, the Governing Council of the ECB took the following monetary policy decisions:

1. The interest rate on the main refinancing operations of the Eurosystem will be decreased by 25 basis points to 0.50%, starting from the operation to be settled on 8 May 2013.
2. The interest rate on the marginal lending facility will be decreased by 50 basis points to 1.00%, with effect from 8 May 2013.
3. The interest rate on the deposit facility will remain unchanged at 0.00%.

The President of the ECB will comment on the considerations underlying these decisions at a press conference starting at 2.30 p.m. CET today.

Now the question is whether Draghi will engage in non-standard measures to facilitate lending for SMEs. For this, tune in to the press conference in 45 minutes.

This is a devastating chart.

Eurozone unemployment hits a brand new high of 12.1%

 What else can you say but that this is a total disaster. >> Read More

Here’s bit of backtracking by the look of it.

According to Reuters a German government spokesman said Chancellor Angela Merkel “in no way intended to infringe on the ECB’s independence” with her comments on interest rates.

You may recall she said that if the ECB looked at Germany alone, it would have to raise rates at the moment. Markets have been buoyant in the past few days on hopes the ECB will actually cut rates next week.

The spokesman also said the German government was confident the constitutional court would uphold the legality of the eurozone bailout measures.

EC president José Manuel Barroso appeared to admit today that Europe’s austerity drive has run its course.

Speaking in Brussels, Barroso warnedthat Europe’s programme of fiscal consolidation has reached its “political and social” limits. He also hinted that countries who are missing their deficit targets will be given more flexibility.

Barroso told the Think Tank Dialogue:

While I think this policy is fundamentally right, I think it has reached its limits…

A policy to be successful not only has to be properly designed, it has to have the minimum of political and social support.

Barroso explained that Europe needs a “stronger emphasis on growth and growth measures”.

Even if the policy of correcting deficit is fundamentally correct, we can always discuss fine tuning of pace.