Readings: High yield spreads, Rupee trend, Forex derivative NPAs

Bespoke:  High Yield Spreads at Everest Proportions The TED Spread remains above 4.5. Not many signs of relaxation in credit markets. Morgan Stanley:  Heightened Alert on Many AXJ Currencies . . .  the adjustment of hedging strategies by local economic agents has been the single-most powerful driver behind the recent weakness in KRW, INR, BRL, and MXN. For countries that have experienced persistent currency strength in recent years, it is likely that the exporters are over-hedged (i.e., bought the local currency at the earliest opportunity for both the carry and the expectation that it will strengthen over time) and importers are under-hedged (i.e., sold the local currency at the latest opportunity). The USD/INR’s price action is starting to accelerate, in our view. Indeed, we believe the risk is that the INR could trace out a similar price path to that of USD/KRW: both currencies share similar negative fundamentals, namely a negativ...