Weekly Money Market Report : Oct 02nd - Oct 06th

The call rates were firm and hovered around 9% the whole week. The call rates in the week opened at around 10-10.25 percent and ended lower at 8.5-9 percent. There was an outflow of almost Rs.13,000 crore towards the repo auction of RBI. The players expected RBI to maintain the repo rate at 10%. There was a cut in repo rates almost in every instrument and this action has sent a positive signal that the central bank would bring down the short-term interest rates. The auction of the 11.30 per cent’ 10 bond auction in the week was over-subscribed by more than twice the notified amount of Rs 3,000 crore. The detailed report follows:

Friday, 6th October

Call money rates ended slightly higher at 8.5-9 per cent amid some demand for funds to cover residual positions on the reporting day. The rates opened at 8.75-9 per cent, as against previous close of 8.25-8.75 per cent. The call rates rose, amid outflows for the 11.30 per cent’ 10 bond auction held on Thursday. The bond auction was over-subscribed by more than twice the notified amount of Rs 3,000 crore. The RBI slashed the three-day repo rate by 50 basis points to 9 per cent. It maintained the cut-off rate for five-day repos at 9.25 per cent. For three-day repos, the Reserve Bank accepted all the 6 bids received for Rs 1,850 crore. It also accepted all the five bids for Rs 305 crore, received at the five day repo auction. Prices of government bonds rose by around 30 paise, after the RBI slashed its three-day repo rate. The 11.4 per cent ’08 bond ended at Rs.100, after touching an intra-day high of Rs.100.25. The 12.5 per cent’04 bond ended at Rs 105.05, after touching an intra-day high of Rs 105.15.

Thursday, 5th October

Call money rates ended lower at 8.25-8.75% amid further cuts in repo rates by the RBI. The rates opened at 9.15-9.5% as against the previous close of 8.5-9%. There were liquidity concerns among players following the outflow for the 11.3% 10 government bond. But following announcement of the Liquidity Adjustment facility (LAF), the call rates eased during the later part of the day. RBI reduced the cut off rates for the one and five day repos by 25 basis points to 9.25%. For one day repos, it received 17 bids for Rs.4,665 crore and accepted 15 bids for Rs.2,140 crore. For the five day repos auction, it accepted 11 bids for Rs.1,730 crore after receiving 13 bids for Rs.1,790 crore. The call rates touched an intra day low of of 8.25% after the auction but rose towards the end on some demand from players. Government bond prices firmed up by 10-20 paise following cut in repo rates.

Wednesday, 4th October

Call rates ended steady at 8.5-9% amid cuts in the one and five day repo rates by the RBI. The rates opened at 9.4-9.75% as against previous close of 8.5-9%. There were concerns about liquidity following outflows for the 11.3% 10 paper. RBI expected to auction the stock for a notified amount of Rs.3000 crore. There were feelings that the RBI would leave the repo rates unchanged. The rates touched an intra day high of 9.75%, before easing to 8.5% levels. RBI slashed the one day repo rate by 25 basis points to 9.5%. It also cut the five day repo rate by 50 basis points to the same level. For one day repos, it received 27 bids for Rs.5,200 crore and accepted 23 bids for Rs.5,005 crore.

Tuesday, 3rd October

Call rates ended lower at 8.5-9 per cent after RBI slashed the cut-off rate for one and three day repos by 25 basis points to 9.75%. The rates fell despite an outflow of almost Rs.13,000 crore towards the repo auction of RBI. The rates opened higher at 10-10.25% as against the previous close of 9.75-10%. The market felt that RBI would maintain its repo rate at 10%. After the liquidity adjustment facility(LAF) results were announced, the markets unwinded the positions taken which allowed the call rates to ease. The call rates touched an intra day low of 8-8.25% but rose towards the close on some fresh demand for funds. For one day repos, the RBI received 17 bids for Rs.2,960 crore and accepted 12 bids for Rs.2,505 crore. For three day repos, RBI received 28 bids for Rs.10,455 crore and accepted 21 bids for Rs.9,275 crore. The cut in repo rates sent a positive signal that the central bank is serious about bringing short-term interest rates down.

Tuesday, 2nd October

Markets closed due to Gandhi Jayanthi.

K.Venu Babu