Weekly Money Market Report : Oct 09th - Oct 13th

The call rates have risen in the week almost all the days in the whole week. The call rates opened at around 8.75-9.25 percent and ended lower at 10.75-11 percent. RBI had announced the semi annual Credit Policy, which left key interest rates unchanged and cautioned that the outlook on inflation remains uncertain because of rising global oil prices. And thus the policy had little or no impact on rates. RBI has reduced and brought the cut-off rates for 1, 3 and 5-day repos to the same level. However, the response for the daily repo auctions was nominal. The detailed report follows:

Friday, 13th October

The call money rates disclosed a tight trend owing to heavy demand for funds to cover reverse requirements in the face-off lenders reservation to offer liquidity at lower levels. Call rates ended at around 10.75-11 percent sharply higher from previous levels of 9.7-9.9 percent after opening relatively firm at around 10.25-10.75 percent on lender driven quotes. Lenders refused to lend funds at rates below the Central Bank's reverse repurchase of securities(repo) rate of 10.5%. Lenders quoted higher rates expecting Central Bank to raise the repo rate because of the pressure on the rupee. RBI however kept the repo rate unchanged at 8.5% and accepted bids for the reverse repo at 10.25%.

Thursday, 12th October

Call money rates ended steady at 9.6-9.8% amid repo reversals of Rs.6400 cr and cut in the 5-day repo rate by the RBI. The interest rates opened at 9.5-9.75, unchanged from the previous close. RBI slashed the 5-day repo rate by 75 basis points to 8.5% and accepted single bid for Rs.4,700 cr. received at the auction. With this cut, the RBI has brought the cut-off rates for 1, 3 and 5-day repos to the same level. The rates touched a high of 10% for a short period but eased when the inflows hit the market. Govt. bond prices ruled bearish but firmed by 5-10 paise after the LAF results. The 12.5% 2004 security ended at 104.93(104.85) while the 11.4% 2008 bond closed at Rs.99.74.

Wednesday, 11th October

Call money rates ended higher at 9.5-9.75% amid higher demand for funds. The overnight interest rates opened at 8.75-9.25% as against the previous close of 8.75-9%. The response for the daily repo auctions of the RBI was nominal. However, the Central Bank rejected the bids received for both the 1 and 5-day repo auctions. For one day repos, RBI received one bid for Rs.300 cr, while for the 5-day repos, it received a single bid for Rs.400 cr. RBI also rejected the five bids for Rs.600 cr received for the reverse repo auction. The call money rates touched an intraday high of 10% after the LAF results, but eased towards the close of the trading on some supplies into the market. Bond prices closely tracked the weaker rupee to end lower by 20-30 paise. The recently issued 11.3% 2010 bond ended at 98.07.

Tuesday, 10th October

Call rates closed around 9-9.1 percent, little changed from Monday's close of 9-9.25% after trading in a range of 8.75-9.25%. Call rates opened lower around 8.75-9% and traded actively around 9%. RBI had announced the semi annual Credit Policy, but had little or no impact on rates. Overall, the call rates remained firm after the Credit Policy left key interest rates unchanged and cautioned that the outlook on inflation remains uncertain because of rising global oil prices. The call rate did not decline despite the Central Bank reducing the 1 and 3-day repo rates.

Monday, 09th October

Call rates ended higher at 9-9.25 percent, despite a cut in repo rates by the RBI. The overnight rates opened at 8.75-9.25 percent as against the previous close of 8.5-9%. RBI slashed the 1-day repo rate by 50 basis points to 8.75%. It slashed the 3-day repo rate by 25 basis points to the same level. For the 1-day repos, the Central Bank accepted 5 bids for Rs.1370 cr. and received 6 bids for Rs.1380 cr. For the 3-day repos, it received 13 bids for Rs.7350 cr and accepted 5 bids for Rs.6360 cr. The call rates rose despite the cut in repo rates due to large outflows to the repo auctions. Bond prices ended higher by 5-10 paise after announcement of LAF results. Bond prices perked up after the repo rates were slashed. The 11.4% 2008 bond ended at 100.12 as against previous close of 100.05%. The 12.5% 2004 bond closed at 105.16(105.10). The recently re-issued 11.3% 2010 security ended at 98.2(98.15)

K.Venu Babu