Green Portfolio’s Monthly Macro Newsletter – 6th October 2023

Dear Investor!

In addition to the weekly newsletter and stock letter we have ongoing, we are now launching a monthly macro newsletter. This is going to be simple and straightforward pointing at prevailing macro trends. We will be covering, in brief, the most interesting charts and macro stories that we came across during the month. Let’s get right into it!

Global Debt

This is a topic that is being slid under the rug by major central banks. Global debt, which includes household, corporate, and government debt has reached an all-time high at $307 trillion. This debt needs to be paid off and the only way to do that is by printing more money. This drives inflation up leading to a never-ending loop.

The New 50 Year Bonds

There are 30-year bonds, 40-year bonds, and now, the new 50-year bonds. The government will be issuing 50-year bonds worth $3.6 billion for the first time. The buyers would be mainly Life Insurance companies and pension funds. These institutions hold very long-term debt to meet their obligations and prefer these types of bonds over everything. Here’s what the chart means:

It shows the cost of borrowing for the government. If they were to issue a 10-year bond, the effective interest would be 7.21%; and if they were to issue a 40-year bond, the effective interest rate would be 7.42%, and so on. You would be surprised to find out that India is a new kid on the block when it comes to the issuance of long-tenure bonds. Countries like Austria and even companies such as Walt Disney and Coca-Cola have issued 100-year bonds.

Oil Prices – Impact on the Indian Economy

If there is one chart, we’d look at, to form our expectations about equity markets, it would be the Oil Price chart. Higher oil prices have a direct negative impact on many industries – paints, FMCG, and chemicals, to name a few.

Saudi and Russia, command 40% of the world’s supply. When they decide to tighten the supply, a lot changes. According to IEA, a $10 increase in oil prices is as good as shaving off 0.5% of global GDP growth. Locally, a 10% increase in oil prices shaves off 0.1% of India’s GDP growth and increases inflation by 0.25% – according to a report by Nomura.

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Green Portfolio is a SEBI Registered (SEBI Registration No. INH100008513) Research Analyst Firm. The research and reports express our opinions which we have based upon generally available public information, field research, inferences and deductions through are due diligence and analytical process. To the best our ability and belief, all information contained here is accurate and reliable, and has been obtained from public sources we believe to be accurate and reliable. We make no representation, express or implied, as to the accuracy, timeliness, or completeness of any such information or with regard to the results obtained from its use.