The US budget deficit is declining faster than expected as the government collects more revenue from companies, households and the two mortgage companies it rescued in the financial crisis in the latest sign of the rebound of the world’s largest economy.

The brighter fiscal outlook comes as other advanced economies are struggling to reduce their deficits through drastic spending cuts and tax rises at a time of weak or negative growth. Growth figures to be released on Wednesday are expected to show that the 17-country eurozone contracted again.

New figures released by the non-partisan Congressional Budget Office showed the US budget deficit falling to $642bn, or 4 per cent of gross domestic product. >> Read More

• un named source on reuters
• says some market participants asked for BOJ to make jgb purchases in smaller instalments

seems like we have some news drifting out of that meeting

• says the BOJ will consider if there is a need to change amount of purchases for each jgb duration

The rating agency noted that the stock of bank credit that has been extended to the private sector was near 136% of GDP at the end of last year, which Fitch says is higher than any other emerging market it tracks.  In addition, when the shadow banking is included, the total credit extended may be near 200% of GDP.    Fitch also noted that local government debt rose to 25.1% last year, up from 23.4% in 2011.  Total government debt is now estimated at almost 50% of GDP.   >> Read More

Italy and Spain have both issued short-term debt today and it seems political instability in both countries has driven borrowing costs higher.

Spain sold €5.6bn of short-term debt, with higher borrowing costs on its 12-month bills. The average yield on the 12-month debt came in at 1.548%, up from 1.472% in January.

Reuters said the rise in yields showed the corruption scandal within the ruling People’s Party and an economy mired in recession is starting to weigh on investor appetite.

Italy, meanwhile, secured an average yield of 1.09% on its 12-month debt, up from 0.86% last month, but still way below last year’s peak of 3.97%.

It is thought that traders are reacting to political tensions ahead of the elections this month.

• GREECE CUT TO SD FROM CCC BY S&P
• S&P CUTS GREECE’S LONG-TERM DEBT RATING TO ‘SELECTIVE DEFAULT’ 

SD, by the way, stands for Selective Default. At least the acronym is not Selective Transitory Default: that would really summarize the situation. 

In other words, Greece is technically default, and why? To make sure a few hedge funds have a great year and get paid on the Greek bonds at double their cost from 4 months ago. The Greek people just get a t-shirt that says “Third Point made a killing, and all i got was this louse Selective Default.” 

But the best news is that Goldman’s European central bank branch is now delighted to accept defaulted, whether selectively or unselectively, Greek bonds as full faith and credit collateral of that multi-colored European currency.

The coalition attempted on Friday to play down concerns about when Greece will receive its next bailout installment ahead of a vote on Sunday night on the 2013 national budget.

Finance Minister Yannis Stournaras said there was no doubt that Greece would receive its 31.5-billion-euro tranche soon. “We are in discussions with the Eurogroup and there is no reason to worry about the disbursement of the loan because Greece is doing what it needs to and Europe is doing what it needs to,” he told journalists.

Stournaras added that Athens expects “a political statement” from eurozone finance ministers on Monday confirming that Greece will receive the money. >> Read More

With an aim of infusing greater funds into infrastructure sector, the government today cleared a tripartite agreement for setting up of Infrastructure Debt Fund (IDF) to re-finance bank debt to the sector.

The Cabinet Committee on Infrastructure (CCI) today cleared the tripartite agreement for operationalising the IDFs after consultation with the Reserve Bank and other stakeholders, Finance Minister P Chidambaram said.

“There is a felt need for long-term infrastructure funding… One year after commencement date, the IDFs will step in and take over the debts of the banks up to 85 per cent,” he said after a meeting of the CCI.

The IDF would be based on a tripartite agreement between developer, lender (bank) and the IDF. The loans by the banks would be refinanced by the IDF so that banks have free funds for more lending.

Infrastructure projects are initially funded by banks or a consortium of banks. Such projects require long-term funding of 20-25 years, while bank funding cannot be of horizon beyond 5-7 years.

“IDFs will provide the long-term funds for the remainder of the life of the project. These frees up bank fund for further lending. This will mean new funds will flow into infrastructure, banks funds will be released one year after commencement of the project. >> Read More

With the ECB’s new bond buying scheme, it appears that Europe is turning the corner on the sovereign debt crisis, as peripheral countries should be able to steadily sell short term debt to investors, who can then flip it to the ECB.

This isn’t a total sure thing, since Spain hasn’t even asked for aid yet (a crucial precondition to bond buying) but at least the mechanisms are starting to fall into place.

But that doesn’t solve a much bigger problem: The crisis of democracy and horrible growth prospects thanks to a dysfunctional system and the need for ongoing cuts.

Today tens of thousands of people in Spain and Portugal turned up to protest austerity.

India’s foreign exchange reserves came down to USD 294.5 billion as of March end 2012, enough to cover imports of seven months, as against eight-and-half months about six months ago.

The reserves — a parameter to gauge a country’s ability to absorb external shocks — came down to USD 294.4 billion at March 2012 end from USD 311.5 billion at September 2011 end mainly due to “intervention in the domestic foreign exchange market and effect of revaluation,” a RBI report said.

“At the end of March 2012, the import cover declined to 7.1 months from 8.5 months at end-September 2011,” said RBI’s ‘Half Yearly Report on Management of Foreign Exchange Reserves: October 2011 – March 2012′.

India’s import bill was USD 37.9 billion in July 2012. >> Read More