Weekly Money Market Report : 27th Nov - 01st Dec

The call rates opened a bit high compared to the last week's close and ended lower. the rate opened at 8-8.15% and ended at 7.5-8%. With the last week's RBI auctioning of the 11-year bond for Rs.3,000 crore, there were expectations of RBI to announce another auction. The inflows from the State Bank of India’s India Millennium Deposit scheme has fuelled the liquidity in the system, keeping the call rates low. However there was a demand at 8% and lower levels as some banks tried to repay their refinance loans with the central bank. The detailed report follows:

Friday, 01st December, 2000

Call money rates ended lower at 7.5-8 per cent on Friday, on poor demand for funds on reporting day. The overnight interest rates opened at 7.75-8.05 per cent, against the previous close of 7.95 to 8.05 per cent. Market players also drew comfort from a statement by the Reserve Bank of India governor Bimal Jalan that interest rates would ease and there was no need to step up the pace of the government’s borrowing programme. RBI, at its 3-day repo auction, accepted all the three bids for Rs.400 crore, at the cut-off rate of 8 per cent. The inflows from the State Bank of India’s India Millennium Deposit scheme is fuelling liquidity in the system, keeping the call rates low. The call rates ruled below 8 per cent for most part of the session, amid adequate supply of funds. Bond prices ended 8-10 paise higher on good buying interest among players. The 11.4 per cent ’08 bond ended at Rs.1 01.58 (101.47), the 12.5 per cent ‘04 bond ended at Rs.105.67 (Rs 105.58), while the 11.03 per cent ’12 bond closed at Rs. 97.83 (97.75).

Thursday, 30th November, 2000

Call money rates ended steady at 7.95-8.05 per cent today, with nominal demand being matched by adequate supply of funds. The overnight interest rates opened at 8-8.1 per cent, as against Wednesday’s close of 7.9-8.05 per cent. Reserve Bank of India received two bids for Rs.200 crore at a cut-off rate of 8 per cent. The inflows from the State Bank of India’s India Millennium Deposit scheme is fuelled the liquidity in the system, keeping the call rates low. RBI has placed the 12.15 per cent ’08 bond on its open market operations at a sale price of Rs.105.33. The sale price on the OMO bond corresponded the secondary market price, which made market participants the impression that the RBI was sending signals on interest rates. Bond prices ended 8-10 paise higher on good buying interest among players. Prices of securities closely tracked the rupee, which ended firmer. The 11.4 per cent ‘08 bond ended at Rs.101.48 (101.47) and the 12.5 per cent ‘04 bond ended at Rs.105.65 (Rs 105.62).

Wednesday, 29th November, 2000

Call rates ended lower at the overnight call money market owing to ample loose liquidity in the system amidst very limited demand, as most banks have covered their reserve needs for the current reporting cycle ending on Friday. Call rates closed around 7.9-8 % lower from Tuesday's close of 8-8.05% after opening around 8-8.1%. The liquidity was more than the demand. However there was a demand at 8% and lower levels as some banks tried to repay their refinance loans with the central bank. And the secondary markets turned active and bond prices posted modest gains on the back of a smart recovery of the rupee. Bond prices of medium and long maturities rose by 5-8 paise on renewed buying.

Tuesday, 28th November, 2000

Call rates ended at around 8-8.05%, little changed from Monday's closing levels of 8-8.1% after opening relatively firm around 8.15-8.25%. RBI pulled out Rs.8000 cr from the system through the 1 day repurchase of securities(repos) at a cut off rate of 8%. The secondary stock markets remained lackluster as operators were expecting another auction of gilts during the week, however mild buying enquiries pushed up prices of the bonds by around 5 paise.

Monday, 27th November, 2000

Call money rates ended lower at 8-8.15 per cent amid easy liquidity conditions on account of inflows from the SBI IMD scheme. The overnight rates opened at 8-8.15 per cent, as against previous close of 7.9-8.1 per cent. RBI accepted the single bid received for Rs.4,000 crore for the one-day repo auction and maintained the cut-off rate at 8 per cent. Last week, RBI auctioned the 11-year bond for Rs.3,000 crore and there were expectations of RBI to announce another auction. Bond prices tracked a weaker rupee to end lower by 15-20 paise. The rupee ended at 46.87/88 per dollar, as against Friday’s close of 46.84/8475. The 11.4 per cent ’08 bond ended at Rs.101.24 (101.41), the 11.03 per cent bond closed at Rs 96.52 (96.63), while the 12.5 per cent’04 bond ended at Rs 105.52 (Rs 105.56).

K.Venu Babu