Weekly Money Market Report : Aug 21st - Aug 25th
The week saw call rates ruling more or less steady except for Friday as the RBI kept its repo cut-off yields steady and also amid ample liquidity in the system. There was not much of a demand from the banks as most of them had covered their reserve positions ahead of reporting Friday. In the first half of the week, the gilts prices fell further due to lack of any buying interest. Also the trading was more limited to the short term securities as the operators are still uncertain of the level of interest rates. In the second half of the week, there was some buying interest in the gilts as the operators had discounted the fall in the rupee. The detailed report follows:
Friday, 25th August
Call rates ended the day lower at 8.5-9% against the previous close of 14%. The overnight rates opened on the day higher at 13.75-14% unchanged from the previous levels. There was no demand for funds as participants had already squared their residual positions ahead of reporting day. The liquidity position in the market was aided by the repo reversals of Rs.3150 crores. The RBI fixed the cut-off rate for three-day repos at 14.5% and the central bank fixed a cut-off of 15% for five-day repos and accepted 20 bids for Rs.1465 crore. Bond prices rallied, after the rupee gained ground in the forex market. The 12.5% 2004 bond ended at Rs.104.65, as against morning levels of Rs.104.30.
Thursday, 24th August
Call rates ended the day steady at 13.75–14% after rising above 14% during the intra day trading. Call rates opened higher at 14–14.5% on liquidity concerns among the operators. There was some demand for funds from the banks also as they had to cover their residual reserve positions ahead of the reporting Friday. The market was also expecting higher repo yields, which kept the rates high. At its reverse repos window, the RBI fixed a cut off yield of 14.5% for its one–day repos accepting bids worth Rs. 3115 crores and a yield of 15% for its five–day repos auction accepting bids worth Rs. 2205 crores. There were apprehensions about the liquidity due to high volatility in the forex market. In the gilts market, there was some fresh buying which boosted the prices of the securities.
Wednesday, 23rd August
Call rates ended the marginally higher at 13.73–14% as compared to their previous close due to volatility in the forex market and higher repo yields. Call rates opened at 13.75–14%, moved in a narrow range, as there was ample liquidity to meet whatever demand for funds was there in the market. At it reverse repos window, the RBI set a cut off yield of 15% for its five – day repos accepting bids worth Rs. 4090 crores and 14.5% for its 3–day repos accepting bids worth Rs. 5000 crores. This way the RBI has sucked out another Rs. 9000 crores from the market. But the operators had already built their positions before the repo results were announced, therefore the rates rose to 14.5% immediately after the announcement of results of liquidity adjustment facility. In the gilts market, the bond prices fell by 30–40 paise due to weakened rupee and liquidity concerns among the operators. The trading was confined mainly in the short-term securities, as the operators are still uncertain about the direction of interest rates. The RBI has announced an auction of Kerala Government bonds worth Rs. 200 crores on August 29.
Tuesday, 22nd August
Call rates ended the day lower at 13.5–14% as against their weekend close amid steady cut off rates for the repos and adequate supplies of funds. Call rates opened at 13.75–14%. In the noon trades, rates were quoted lower because the operators were expecting that the RBI would fix a lower cut off rate for the repos. But the RBI kept the rates steady, 14.5% for its one-day repos and 15% for its three days repos sucking out Rs. 8440 crores from the system. With refinance facilities almost utilized by all the operators and no redemption in the near future, the call would be in the range of 14–15%. The prices in the gilts market remained range bound with operators unwilling to take fresh positions due to uncertainty surrounding the level of interest rates.
Monday, 21st August
Holiday