Mini Feature CENTRAL BANK RESERVES

By: Dr K C Gupta, YBB Personal Finance

CONTRARIAN INDICATORS

AAII Bull-Bear Spread -4.4% (below average)
CNN Fear & Greed Index 55 (neutral)
NYSE %Above 50-dMA 50-dMA 55.34% (positive)
SP500 %Above 50-dMA 58.00% (positive)

ICI Fund Allocations (Cumulative), 6/30/26
OEFs & ETFs: Stocks 63.07%, Hybrids 3.86%, Bonds 16.93%, M-Mkt 16.15%

INTEREST RATES

CME FedWatch
Cycle peak 5.25-5.50%
Current 3.50-3.75%
FOMC 9/16/26+ hold
FOMC 10/28/26+ hold

Treasury

T-Bills 3-mo yield 3.88%, 1-yr 4.03%; T-Notes 2-yr 4.24%, 5-yr 4.43%, 10-yr 4.74%; T-Bonds 30-yr 5.27% (normal yield-curve);
TIPS/Real yields 5-yr 2.09%, 10-yr 2.40%, 30-yr 3.00%
FRNs Index 3.750%

Bank Rates www.depositaccounts.com/


Stable-Value (SV) Rates, 8/1/26
TIAA Traditional Annuity (Accumulation) Rates
Restricted RC 5.25%, RA 5.00%
Flexible RCP 4.50%, SRA 4.25%, IRA-101110+ 4.15%
TIAA MYGA 4.60% (3-yr), 4.80% (5-yr), 4.85% (7-yr)
TSP G Fund 4.875% (previous 4.500%)

India Fear & Greed MMI 43.98 (fear)
Weekly ETFs: INDA -0.28%, INDY -0.16%, EPI -0.05%, INDH -0.51% | SPY -1.37%

The data above are as of Sunday preceding the publication date.

ECONOMY

RBI is ending lucrative FCNR deposits deal early on 8/31/26 (vs 9/30/26) having netted $57 billion.

Government of India (GoI) is selling stakes in several public sector companies in FY 2027 (4/1/26 – 3/31/27). The stake sales from almost a dozen companies may raise $8 billion in FY 2027. These companies include Cochin Shipyard, Indian Railways Finance Corp, NHPC (hydropower), Coal India & LIC (life insurance). The recent LIC stake sale reduced GoI stake to 90%. SEBI (securities regulator) rules now require 10% market floats, but GoI had until 05/2027 to achieve that, so this move about 9 months early drew attention. It seems that US-Iran war & foreign fund outflows have put strains on GoI resources & RBI foreign exchange reserves. GoI also has incentive programs for foreign investments & NRI deposits.

INDUSTRIALS

World’s largest HVAC company Japanese Daikin Industries is establishing a R&D center in India to develop HVAC products for the Indian market. These products will include large-scale HVAC systems for commercial buildings, datacenters & industrial facilities that are compatible with local laws. Daikin-India has operations in India since 2000. Daikin-US offers products under brands AAF, Amana*, Daikin, Goodman*, motili, Quietflex, etc. *Doesn’t include kitchen appliances.

INFRASTRUCTURE

US DPR Construction got a big infrastructure contract from the Indian Ministry of Housing & Urban Affairs (MoHUA). Several mega projects will use virtual design & construction (VDC), green-building standards, climate resilience & prefabrication & modular building systems. There will be related technology transfer & local training. These projects will be in New Delhi (central district), Mumbai (coastal residential), Bengaluru (tech sector housing), GIFT City (commercial & residential), Hyderabad (residential), Kolkata (waterfront urban renewal), Chennai (modular transit hubs), Pune (datacenters & housing), Ayodhya (fusion architecture), Guwahati (earthquake resistant modular housing).

SPECIAL TOPIC – CENTRAL BANK RESERVES

Reserve assets as % of GDP vary widely by country. The reserve assets include foreign currencies, gold, IMF SDRs & IMF reserve positions (available in emergencies only). The data reported may be with & without gold. Controversially, some central bank reserves include stocks, corporate bonds & ETFs – BOJ, SNB, several European & EM central banks; even the US Fed held some corporate bond ETFs during Covid pandemic. But most central bank reserve assets are high-quality liquid assets.

These reserve % for developed countries are lower than those for emerging-market (EM) countries. One explanation is that developed economies are more mature, stable, & less susceptible to sudden currency swings. Another is that many developed countries carry gold at historic book values, while most EMs value gold at current prices. But even the non-gold reserves for developed countries are much lower than those for EMs.

Reserve assets for US (without gold) are low because dollar is a global reserve currency & its demand is high. But central banks are diversifying reserve assets into nondollar assets due to concerns about US debt, dollar diplomacy & sanctions – the money in Western banks can suddenly be frozen & become inaccessible.

Due to these reasons, the % reported vary widely by sources. Indian reserves are 15-18% of GDP (with gold), enough to support 11 months of its imports. In 1970s, due to OPEC oil embargo, Bangladesh liberation war & crop failures, Indian reserves were very low. Then, in 1991, due to Gulf War & the collapse of Soviet Union (& that of lot of bilateral trade in rupees or rubles), India literally ran out of reserves & had to secure foreign loans by airlifting planeloads of domestic gold. The current cautions reserve policy of India is intended to avoid repetitions of those situations.

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