Fin-nomics

  Local financing government vehicles are funded and operated by local government authorities to fund infrastructure or other development projects, such vehicles were established by the local municipalities through the injection of land, equity and different sorts of capital instruments like bonds, commercial papers, etc. These type of financing vehicles became famous when after the 2008 financial crises the Chinese regional governments started funding infrastructure projects by taking on bank loans through the off-balance sheet Local Government Financing Vehicles (LGFVs).   Chengtou are LGFVs specifically established to fund mega projects requiring a lot of capital and these were created mainly as a part of China’s stimulus package against the global financial crises of 2008. Since the Chinese government took a proactive strategy by devolving around 2.2 trillion yuan to local authorities so that they can undertake extensive urbanization to increase employment in the economy...

 PRIVATE CREDIT FUNDS? Private credit Industry has been recently expanding at an exponential rate over the past few years as per Preqin till June 2021 the assets under management of private credit managers was $1.2 trillion suggesting the fact that the industry is trying to outgrow its earlier small time business roots with a lot of money sloshing around searching for attractive returns as central banks all over the world are following a tightening monetary policy to tame soaring inflation levels. As per a S&P Global report the private debt industry was having assets of around $412 billion dollars at the end of 2020.   A Reuters article stated that there is a 76% jump in the number of private credit funds targeting Asia following regional and India specific strategies. According to Global Private Capital Association, in North America around %150.1 billion of private capital was raised and a total of at least $2.5 billion of new credit funds were lau...

  Switching Operations   Recently the GOI bought back 6.18% bonds maturing in 2024 worth 226.10 billion rupees ($2.78 billion) at a price of 98.62 rupees while it issued 8.28% 2032 bonds worth 210.26 billion rupees to the RBI at 106.05 rupees, as per the RBI. Such operations are called switch operations which are undertaken with the sole purpose of smoothening the liability profile of the issuer. The 10-year government security’s yield fell by 7 basis points after government switched bonds and securities worth rupees 1.19 trillion with the RBI which brings down the redemption pressure on Indian government by around rupees 62,000 crore.    What are bond switch operations? Bond switching operations allow governments to repurchase the older sovereign bonds (basically short-term) and in their place issue newer bonds (long-term) to the participants. Since such operations are cash neutral as fresh securities are issued which replace the old existing securities. ...