Weekly Money Market Report : Dec 04th- 08th

The call rates were almost flat through out the week. The rate opened at 8-8.2% and ended at 7.95-8.05%. RBI had accepted all the bids and was expected to be an indication that the Central bank does not want excess liquidity to float in the system, that may increase speculative pressure on the rupee. The last tranche of the State Bank of India's India Millennium Deposit scheme of around Rs.4,000 crore entered the system, which fuelled liquidity in the system, keeping the call rates low. Despite lower demand, the call rates refused to fall sharply below 8.00 per cent because banks could park their excess funds at the Reserve Bank of India's (RBI) daily auction of repurchase of securities (repos) agreements, also at 8.00 per cent. On the whole, the trading was observed largely in short and medium-end securities. The detailed report follows:

Friday, 8th December, 2000

A steady to slightly easy trend continued to prevail at the overnight call money market due to plenty of liquidity in the system to meet the limited demand of borrowing banks. Call rates ended around 7.95 - 8.05 per cent, unchanged from Thursday's closing levels after trading in a narrow band of 7.90 - 8.10 per cent. The rates opened around 8.00 - 8.05 per cent and actively traded around 7.95 - 8.05 per cent for the better part of the day's business. However, last minute demand to cover reserve needs pushed up rates to 8.10 per cent, but eventually finished on the lower side of its current range. The Reserve Bank of India (RBI) sucked out around Rs.4,800 crore from the system through the three-day repurchase of securities (repos) agreement auction on Friday at a cut-off price of 8 per cent. The central bank injected around Rs.4,200 crore into the system through the reverse repo route.  The secondary market for securities continued to be well bid in active business, but late profit-booking pared part of the sharp early gains.

Thursday, 7th December, 2000

Call rates continued to rule steady in tight range-bound trade at the overnight call money market here on Thursday owing to ample loose liquidity in the system to meet the limited demand of borrowing banks. Call rates closed around 7.95 - 8.05 per cent, unchanged from overnight closing levels, after trading in a narrow band of 7.95 - 8.10 per cent. Call rates opened around 8.05 - 8.10 per cent and traded actively between 8.00 - 8.05 per cent. Despite lower demand, the call rates refused to fall sharply below 8.00 per cent because banks can park their excess funds at the Reserve Bank of India's (RBI) daily auction of repurchase of securities (repos) agreements, also at 8.00 per cent. RBI mopped up around Rs.4,200 crore at its daily repo auction at a cut-off price of 8.00 per cent on Thursday. The secondary market for securities staged a further rally, as easy conditions in the call money market induced operators to take positions in the bond market. However, late profit-taking pared part of the early sharp gains. Prices of bonds of medium and longer maturities rose by around 15 - 20 paise on renewed buying enquiries.

Wednesday, 6th December, 2000

Call money rates ended slightly higher at 8-8.1 per cent amid outflows for the Central bank's repo auction. The overnight interest rates opened at 7.95 - 8.1 per cent, as against the previous close of 7.95 - 8.05 per cent. For one-day repos, the Reserve Bank of India (RBI) accepted the single bid received for Rs.5,000 crore at a cut-off rate of 8 per cent. The last tranche of the State Bank of India's India Millennium Deposit scheme of around Rs.4,000 crore entered the system on Wednesday. Bond prices closely tracked a firmer rupee to end higher by 20-25 paise. RBI withdrew the 12.15 per cent 2008 bond from its OMO list. The 11.4 per cent 2008 bond ended at Rs.101.92 (101.68), the 12.5 per cent 2004 bond ended at Rs.105.87 ((Rs.105.76), while the 11.03 per cent 2012 bond closed at Rs.98.12 (97.93). 

Tuesday, 5th December, 2000

Call money rates ended lower at 7.95-8.05 per cent amid good inflows entering the banking system. The overnight interest rates opened at 8-8.1 per cent, unchanged from the previous close. For one-day repos, the Reserve Bank of India accepted the single bid received for Rs.6,000 crore at a cut-off rate of 8 per cent. The last tranche of the State Bank of India’s India Millennium Deposit scheme of around Rs.4,000 crore was expected to enter the system. Bond prices closely tracked a firmer rupee to end higher by 5-10 paise. The 11.4 per cent 2008 bond ended at Rs.101.66 (101.6), the 12.5-per cent 2004 bond ended at Rs.105.76 (Rs 105.7), while the 11.03-per cent 2012 bond closed at Rs.97.93 (97.83). The trading was observed largely in short and medium-end securities.

Monday, 4th December, 2000

Call money rates ended slightly higher at 8 - 8.1 per cent on Monday, on account of customary demand for funds at the start of the new reporting period. The overnight interest rates opened at 8 - 8.2 per cent, as against the previous close of 7.95 - 8.1 per cent. For one-day repos, the Reserve Bank of India (RBI) accepted two bids received for Rs.6,100 crore at a cut-off rate of 8 per cent. Call rates rose in the afternoon session, following liquidity concern among players, after outflows towards the repos. Accepting all the bids by the RBI was expected to be an indication that the Central bank does not want excess liquidity to float in the system, that may increase speculative pressure on the rupee. Bond prices closely tracked a firmer rupee to end higher by 5-10 paise. Inflows from the State Bank of India's India Millennium Deposit scheme is fuelling liquidity in the system, keeping the call rates low and aiding rally in bond prices. The 11.4 per cent 2008 bond ended at Rs.101.6 (101.57).

K.Venu Babu