Friday (Jun 9th)

Call rates closed firm at 9.50-9.75% in the inter-bank call money market on account of the Rs. 4000 crore bond auction. Call rates opened firm at 9.75-10.25% and immediately touched a high of 10.75%. Then the RBI entered the market and infused liquidity into the market through its reverse repo auction window. It lent Rs. 3850 crores through its new liquidity adjustment facility. This eased the call rates to close at 9.75%.

Dealers said that the rates were high partly due to the bond auctions and partly due to uncertainty surrounding the RBI’s response to reverse repo auction. The liquidity situation is expected to remain tight in the short-term and therefore there can be more pressure on call rates in the near future.

As expected, call rates closed firm on Thursday amid huge demand for funds, despite the liquidity injection by the RBI through its reverse repo auction. Call rates closed at 9.10- 9.25% against its previous close of 8.90-9.25%. Some stray deals were also reported at 9.50% earlier in the day. The RBI again opened its reverse repo window to inject liquidity into the market under its new liquidity adjustment facility (LAF) with repo and reverse repo auctions. A dealer said that not everyone had enough securities against which to borrow at LAF and so these borrowers turned to the call market, which pushed the rates up.

Call rates were expected to stay firm on Friday as there will be outflow of funds from the market towards the auction of Rs. 4000 crores worth of Government dated securities on Thursday. The auction is expected to get 60% subscription according to a poll done by Reuters. Dealers said that the RBI’s refinance facility is almost exhausted and steady demand for funds to cover the reserve positions will keep the call rates firm.

Call rates closed at around 8.9% in inter - bank call market on Wednesday. Call rates opened high in the range of 8.9 – 9.2% amid fears of tightening liquidity in the market due to outflow of Rs. 4000 crores on auction of dated securities on Thursday. Rates immediately firmed up to move above 9% & touched the high of 9.75% later in the afternoon. The Reuters Mibor was 9.29% as compared to 7.86% on Tuesday. However, later in the day, RBI infused Rs. 1285 crores in the market by way of reverse repos. In consequence to this, rates came down to close at around 9% level. RBI also discontinued sale of T-bills and the recently devolved 11-year paper from its sale window, which further eased the liquidity in the market.

Call rates further moved up on Tuesday amid steady demand for funds. Call rates ended the day at 8.10-8.25% against Monday’s close of 7.3-7.5%. A bond auction to meet the government's gross borrowing program was expected which caused some short-term liquidity concerns. Because of this, state run banks hiked rates early in the day. With refinance facility from RBI fully availed of, there was steady demand for funds to cover the reserve positions. Bond prices were also weak on worries over rise in interest rates in the short run, due to this tightened liquidity. Call rates were expected to move up further on Wednesday, if there was no support from the RBI through open-market operations or repos.

Call rates closed around 7.3-7.5% in the inter-bank call money market on Monday, up from Saturday’s close of 6.9-7.2%. Call rates opened firm around 7.10-7.30% and touched a high of 7.40% during afternoon trades. There was sufficient liquidity in the market but there was also matching demand, as Monday was the first day of the new reporting fortnight for banks and FIs. So these banks wanted to cover their positions on the first day of the fortnight, dealers said. RBI accepted no bids at its one-day repo auction window. The sentiment in the G-secs market was also subdued due to the volatility in the forex market.