Just wanted your interpretation of the Fed minutes coming in and right ahead of the Fed minutes too, we did see commentary coming from Mr Bernanke, is Wall Street now factoring in a rate cut by end of year? Where is it drawing the strength from?
Geoff Dennis: I think the minutes were pretty predictable, frankly. I do not think there was any big surprise. I know there was talk of some people on the committee talking about they would be willing to raise interest rates again if inflation perhaps tick back up again or did not come down any further. I think the risk of a rate hike from here is very-very low. And my sense now is that with quite a bit of evidence of the margin that some of the macro data is getting softer, I think we are going to get a rate cut in September and the market is saying 70% chance of that and I agree with that and then another rate cut before the end of the year. My original call was July.
I think July is a tough call now, although the payroll numbers on Friday will give us another clue on that. But I think they will cut twice before the end of the year, probably in September and December.I think the bigger talking point is all the chatter which is now only getting louder with talks that Joe Biden will actually opt out of the presidential race. I think that is going to, in the run up to November, have a bigger implication for the market.
Geoff Dennis: Yes, I think so. I mean, clearly at the margin I think the market probably would prefer to see ex-President Trump re-elected. A friend of mine texted me the other day, said Trump is going to win and the markets are going to go up and that is a rather simplistic view. But nonetheless, I see the point about that comment. And Trump was very good for the markets last time. Now, I think the danger with a Trump victory being assumed to be good for the financial markets this time is that we already have a very large budget deficit problem in the US and if Trump wins and were to put some of his policies in place, which is in particular cuts in income taxes and cuts in corporation taxes, the deficit is going to get bigger still and that is eventually going to be a problem for the market.
So, I think the market is fascinated by the politics, which is sort of no surprise because it is really interesting what is going on. And I think net-net probably the market would prefer a Trump victory, but there are big challenges for the macroeconomics in the event that Trump does win and the market will have to assimilate those going forward.
There have also been implications with all of this news, as well as coupled with the kind of macroeconomic data emerging out of the US with what is happening with the bond yields across the globe and it seems like Indian bond yields as well have been tracking the US peers. How are you looking at the money markets there?
Geoff Dennis: I think that bond yields have been pretty stable in the US recently in the sense that although they have been moving quite a bit on a daily basis, they have been trading in 10 years between 4.2 and 4.5 for several weeks now. The logic is I think that some sort of a major fiscal deficit shock that we will see as the Fed starts to think about. We are close to a Fed rate cut. Let me put it that way. The bond yields will probably tick a little bit lower and I think that will support lower bond yields generally across the emerging world, including in India assuming that we eventually do get some sort of breakdown in the dollar. Now, I have been waiting for this for a while and I think a key part of getting many more flows towards the emerging market including to India although obviously as you have said India is picking up new FII flows right now, a major part of that will be when we can see the Fed starting to cut rates which will bring I believe the dollar lower and that will allow some of these other emerging economies eventually probably India to reduce interest rates, so bond yields will come down.
