Use of Bloomberg Terminal to analyze and predict Sovereign Debt Yield Curves of foreign countries (India).

1. Finance 490 - Bond Analysis
Sovereign Debt Analysis Country: India
Group Members: Craig Thomas, Ben Howard, James (Tony) Williams
Sovereign Debt Project
Part A: 2012 India Yield Curve
Maturity (years) 0.25 0.5 1 2 3 4 5 7 8 10 11 12 13 14 17 19 23 27 28 29
Yield 4/2/13 7.85 7.798 7.774 7.68 7.834 7.868 7.968 7.965 8.064 7.992 8.143 8.094 8.099 8.174 8.256 8.08 8.192 8.187 8.254 8.208
Projected Yield 4/2/15 7.7 7.69 7.68 7.65 7.83 7.872 7.9 7.975 8.1 8 8.2 8.18 8.14 8.18 8.3 8.08 8.25 8.25 8.3 8.29
Part B:2012 Credit Metrics
INDIA
Credit Agency: Rating: Outlook: GDP Calculations: 2012
Moodys Baaa3 Stable Overall GDP $1,847,982
Fitch BBB- Negative Overall Debt $1,256,627
Standard &Poors BBB-u Negative Debt to GDP % 68.053%
Budget Surplus % 32%
Our project is on India. According to Bloomberg, the Standard & Poor’s rating of Indian debt is BBB-u,
the Moody’s rating is Baa3, and the Fitch rating is BBB-. Fitch and Standard & Poor’s consider the
upcoming outlook to be negative; however, Moody’s considers Indian debt to be a stable investment.
Although these are low ratings, they are still considered “investment grade’’. According to trading
economics the debt to GDP percentage is 68.053% (Indicators). The GDP is currently $1,847,982 (in
millions of US dollars). External debt is $345,819 million. Domestic debt equals $910,808 million. So the
total outstanding debt is $1,256,627 (Bloomberg).The current yield curve is very volatile. The most
noticeable change is the dramatic drop from 6 month to two year maturity then the rise at a moderate
pace. This drop is very unique compared to the United States yield curve the United States. According to
a recent Wall Street Journal article India’s Central Bank has recently cut the lending rate by a quarter of a
percent (Sudeep). This move is an attempt by India’s Central Bank to stimulate the economy by
encouraging bank lending. This decision is very similar to the United States current Central Bank Policy.
The decrease of the lending rate should in turn lower interest rates on sovereign debt (Sudeep).

2. Finance 490 - Bond Analysis
Sovereign Debt Analysis Country: India
Group Members: Craig Thomas, Ben Howard, James (Tony) Williams
Indian Interest Rate (RBI long-term) Indian Interest Rate (RBI last year)
(Graphs from Global Rates)
Part C: Economic Situation of India of 4/2/13
India has the 10th largest GDP in the world, but similar to many other countries, is currently faced with
slow growth and the risk of high inflation. India’s GDP is $1.85 trillion, but growth has nearly halved
from from 9.6% annual growth in 2006 to 5.15% annual growth in 2012. India’s GDP is expected to
grow by 5.2% in 2013 before climbing up to 6.20% and 6.80% in 2014 and 2015, respectfully (Global
Finance). The wholesale price index, the main gauge of inflation in India, dipped below 7% for the first
time in three years in January, and stayed below that mark in February (Sudeep). However, India’s
central bank warned that expected increases in inflation may leave little room for further cuts to help
stimulate the economy. The Indian rupee weakened in respect to the U.S. dollar, with the U.S. dollar
trading at 54.37 rupees compared with 54.00 rupees.
Part D: Interest Rate Forecast as of 4/2/14
Based on our research we believe that India will lower interest rates in the short term and increase in the
long term. Our decision was based upon the need to spur the economy in the short term due to poor global
economic conditions. A second reason for lower short term rates comes from the recent trend of lending
rate cuts made by the Reserve Bank of India and the overall recent trends of India’s interest rates in the
past 5 years. We have seen GDP growing at a decreasing rate; however, general analyst consensus is that
GDP growth will pick back up in the near future (though this may be dependent on the state of the overall
global economy). Severe inflation, high unemployment, current account deficit, and the need for foreign
capital will hinder the ability of the reserve bank of India to make drastic interest rate cuts. Severe
inflation won’t allow large interest rate cuts because investor’s refuse to have a negative return. Drastic
rate cuts are also improbable because they could possibly widen the current-account deficit and lessen the
attractiveness for foreign investors. The previous factors have led us to a slight decrease in the short term
interest rates and slight increase in the long term which are shown in Part A.

3. Citations:
Bloomberg L.P. India Sovereign Debt Yield Curve. 3/2/13 to 4/2/13. Bloomberg terminal, 2April 2013.
"India GDP Data & Country Report | Global Finance." India GDP Data & Country Report | Global
Finance. GF Mag, n.d. Web. 03 Apr. 2013: http://www.gfmag.com/gdp-data-country-reports/255-
india-gdp-country-report.html#axzz2PH2RN4DQ
"Indicators for INDIA."Indicators for INDIA.Trading Economics, n.d. Web. 03 Apr. 2013:
http://www.tradingeconomics.com/india/indicators
Jain, Sudeep. “India Central Bank Cuts Lending Rate”.Wall Street Journal.19 Mar. 2013:
http://online.wsj.com/article/SB10001424127887323415304578369542538731104.html
"RBI Repo Rate - Indian Central Bank's Interest Rate."RBI Repo Rate.Global Rates, n.d. Web. 03 Apr.
2013: http://www.global-rates.com/interest-rates/central-banks/central-bank-india/rbi-interest-
rate.aspx
References:
"Geography."Infoplease.Infoplease, n.d. Web. 03 Apr. 2013:
http://www.infoplease.com/ipa/A0107629.html
"India." India Data.World Bank, n.d. Web. 03 Apr. 2013: http://data.worldbank.org/country/india