Weekly Money Market Report : Oct 23rd - Oct 27th

The call rates have come down marginally in the week. The call rates opened at around 8.75-9.25 percent and ended lower at 8.25-8.5 percent. Demand for funds was minimal, with players cautious about taking positions at the start of the new reporting period. The whole week saw a cut in the repo rates across all the repos. RBI slashed the 5 day rate to 8%, bringing it on par with the rate of interest at which it provides level I refinance to banks and primary dealers. The cut in repo rates sent the call money rates down while bond prices firmed up. The detailed report follows:

Friday, 27th October

Call money rates ended higher at 8.25-8.5 per cent amid liquidity concerns in the markets. The market opened at 8.5-8.6 per cent as against the previous close of 8-8.15 per cent. Reserve Bank of India (RBI) slashed its three-day repo rate by 25 basis points to 8 per cent. It maintained its five-day repo rate at the same level. Markets expected RBI to slash the one-day repo rate to 8 per cent in the next auction. For three-day repos, RBI accepted all the three bids received for Rs 4,270 crore. For five-day repos, it accepted the single bid for Rs.1,000 crore. Bond prices closely tracked the weak rupee and ended lower by 10-20 paise. The 11.4-per cent 2008 bond ended at Rs.99.96(Rs 100.03). The security touched a low of Rs.99.90 in morning trades. The 11.03-per cent 2012 bond ended at Rs.95.72.

Thursday, 26th October

Holiday

Wednesday, 25th October

Call money rates ended lower at 8 – 8.15% amid cut in the five day repo rate by RBI. The rates opened at 8.25 / 8.75% unchanged from the previous close. RBI slashed the 5 day rate to 8%, bringing it on par with the rate of interest at which it provides level I refinance to banks and primary dealers. It also fixed the 2-day repo rate at 8%. For 5 day repos, it received a single bid for Rs.1000 crore which it accepted partially for Rs.500 crore. For 2 day repos, the Central Bank received two bids for Rs.4090 crores and accepted both partially for Rs.2045 crores. Call rates responded to the repo rate cuts and eased to 8% towards the end. Bond prices also firmed following the cut in repo rates. These gains were however, liquidated on liquidity concerns after the 12 year bond auction and the fall in rupee. The RBI auctioned the 11.03% 2012 bond for Rs.3000 crore.

Tuesday, 24th October

Call money rates ended lower at 8.25 – 8.75% amid cuts in the one and three day repo rates by RBI. The rates opened at 8.75 / 9.25% as against the previous close of 8.75 – 9%. RBI slashed the one and three day repo rates by 25 basis points to 8.25%. For 1 day repos, it accepted the single bid received for Rs.2000 crores. For 3 day repos, the bank received 1 bid for Rs.4000 crore and accepted the bid for a partial amount of Rs.500 crore. The cut in repo rates sent the call money rates down while bond prices firmed up. The rates touched an intra day low of 8.25%. The bond prices ended higher by 15 – 20 paise amid some buying interest following the cut in repo rates. The 11.4% 2008 bond closed at Rs.100.02 as against previous close of Rs.99.93. The bond was traded around Rs.99.92. The 11.3% 2010 bond ended at Rs.98.12 as against previous close of Rs.97.90.

Monday, 23rd October

Call money rates ended steady at 8.75 – 9% amid low demand for funds at the start of the new reporting period. The rates opened at 8.75 – 9.25% as against the previous close of 8.5 – 9%. Demand for funds was minimal, with players cautious about taking positions at the start of the new reporting period. The call money rates hovered in the range of 8.75 – 9.25% through out the day but ended slightly lower on fresh supplies of funds. Bond prices ended slightly higher amid some buying interest among players. The bond prices were steady for most part of the day though there was some buying interest. The 12.5% 2004 Bond ended at Rs.105.12 as against previous close of Rs.105.10. The 11.4% 2008 Bond closed at Rs.99.93 as against previous close of Rs.99.84. For the three day repos, RBI maintained rate at 8.5% and had accepted the single bid received for Rs.2000 crores. For the four day repo auction RBI received 3 bids for Rs.6200 crore and accepted 2 bids for Rs.2100 crore.

K.Venu Babu