Weekly Money Market Report : Sep 04th - Sep 08th
The call rates were very volatile and moved in the range of 8.75 to 16% in the week. The call rates in the week opened at around 9% and ended at around 10%. Market sources anticipated that the central bank would maintain its cut-off yields at the previous levels. Dealers also expected call rates to touch the refinance levels of 8%. But no change in the government's decision pulled the call rates up. There was an outflow of Rs.10,635 crore towards the repo auction. For one day repos, the RBI fixed a cut off rate of 12%. The 12.5 % 2004 bond ended at Rs.105.04 as against Rs.104.86 on previous close. The 11.4% 2008 bond closed at Rs.99.75/77, as against previous close of Rs.99.95. For the four day repos, the central bank had cut off to 12%. For reverse repos, the RBI rejected the two bids received for Rs.200 crore. Prices of government bonds rose amid renewed buying support from players. The detailed report follows:
Friday, 8th September
Call rates ended steady at 10-11 percent, after easing to single digit levels on low demand for funds coupled with slashing of repo yields by the RBI on reporting Friday. The rates opened at 10-11%, unchanged from Thursday's close of levels. The call rates were quoted lower on customary low demand for funds on reporting day. Inflows from repo reversals and coupon payments aided the sentiment. RBI slashed the 3 day repo rate by 250 basis points to 10.5%. It accepted 20 bids for Rs.3820 crore out of 22 bids for Rs.3870 crore. For five day repos, RBI cut the repo rate by 200 basis points to 11 %. It accepted 19 bids for Rs.3265 crore out of 21 bids for Rs.3285 crore. RBI officials stated that the government would hold back its borrowings programme till the third week of September. The call rates touched an intra day low of 8.75%, but firmed in the afternoon on demand for covering residual positions. Inflows from coupon payments and repo reversals were around Rs.15,000 crore. However, demand for funds pushed the call rates higher.
Thursday, 7th September
Call rates ended higher at 14-15% on large demand for funds ahead of reporting Friday. The rates opened at 11.5-12.5% as against the previous close of 11-12%. Liquidity was tight as market participants were busy covering residual positions ahead of reporting Friday. The call rates touched an intra day high of 16% with stray deals reported at 17-17.5% too. The call rates ended lower amid lowering of repo yields by the RBI. The RBI slashed the cut off rates for one day repos to 11 % and accepted two bids received for Rs.310 crore. For the four day repos, the central bank had cut off to 12% and accepted 24 for 2,130 crore out of 29 bids for 2,400 crore. For reverse repos, the RBI rejected the two bids received for Rs.200 crore. Prices of government bonds rose amid renewed buying support from players.
Wednesday, 6th September
Call rates ended lower at 11-12% amid repo redemptions of Rs.5,555 crore with low demand for funds. The rates opened at 12-14% and remained at 14% in the morning session amid expectations about tighter liquidity. Market expected RBI to suck out the inflows from repo redemptions. The RBI maintained its cut off rate at the one day auction at 12%. It accepted 6 bids for Rs.1,320 crore out of 8 bids for Rs.1,340 crore. For five day repos, the central bank fixed a repo yield of 13%. The RBI accepted 21 bids for Rs.1,360 crore. It accepted 23 bids for Rs.1485 crore. Prices of government bonds fell marginally as against the morning levels, on anticipation of liquidity concerns among the players. However, bond prices were up 5-10 paise compared to the previous day's values.
Tuesday, 5th September
Call rates ended firmer at 12-14%, amid higher outflows towards the repo auction of the RBI. The rates opened at 10-11%, as against the previous close of 8.75-9.25%. The market expected RBI to lower its repo rates but no change in it has allowed the call rates to firm up. There was an outflow of Rs.10,635 crore towards the repo auction. The call rates touched an intra day high of 16%, but settled lower on unwinding on positions by some players. For one day repos, RBI maintained cut off rate at 12%. It accepted all the 28 bids received for Rs.3,415 crore. For three day repo auction, the central bank fixed a cut off rate of 13%. It accepted 50 bids for Rs.7,220 crore out of 51 bids for Rs.7,230 crore. Bond prices slumped after announcement of LAF results. The recently issued 11.4% 2008 bond closed at Rs.99.75/77, as against previous close of Rs.99.95.
Monday, 4th September
Call rates ended the day at 8.75 – 9.25 percent after the RBI fixed a lower cut off at its repo auctions. The rates opened higher at 10-11 per cent, compared to the previous week's close of 8-8.5 %. Players anticipated the central bank to maintain its cut-off yields at the previous levels. But once the Liquidity Adjustment Factor (LAF) was known, the call rates fell down. Dealers expect call rates to touch the refinance levels of 8% on expectation of fall in repo yields. For one day repos, the RBI fixed a cut off rate of 12%. The RBI accepted all the 22 bids received for Rs.5,210 crore. For the four day repos, the RBI fixed a cut off rate of 13% and received 52 bids for Rs.7,270 crore. Bond prices rose amid a strong rupee and lower repo yields. The 12.5 % 2004 bond ended at Rs.105.04 as against Rs.104.86 on previous close.
K.Venu Babu