Weekly Money Market Report : Dec 18th- 22nd

The call rates rose almost all the days. The rates opened the week at 8.6% and ended at 9.5-10%. The markets expect Rs.8,000-9,000 crore to leave the system during the coming fortnight for payment of advance taxes. RBI governor Bimal Jalan said that the cost of borrowing for the government was still high. The market took this statement as a signal that the RBI may slash the key interest rates in the coming months. The week saw good buying in long tenor securities, amid strengthening of the rupee. There was demand for funds, as players were concerned about tightening of liquidity in the week. All the employees of public-sector banks and RBI observed a one-day nationwide strike on Thursday called by the united forum of bank unions to protest the proposed privatization of nationalized banks and this has led to poor trade during the day. The detailed report follows:

Friday, 22nd December, 2000

Call money rates ended higher at 9.5-10 per cent amid heavy demand for funds on liquidity concern among players. The overnight rates opened at 8.75-9 per cent, as against the previous close of 8.5-8.75 per cent.  There was huge borrowing demand on account of expectations of liquidity tightening after the twin bond auction on December 26. There were outflows of Rs.8,000-9,000 crore towards payment of advance taxes. For the four- day reverse repo auction, the Reserve Bank of India (RBI) received eight bids for Rs.1,050 crore and accepted six bids for Rs.350 crore at a cut-off rate of 10 per cent. It received no bids for the four-day repo auction. Bond prices ended slightly higher on bargain buying by players.The market expects the RBI to fix a higher cut-off yield for the 11.43 per cent'15 bond. As trading in the 15-year stock is thin, the 11.03 per cent'12 bond reacted to this expectation by moving up. The 11.03 per cent'12 security ended at Rs.98.25, as against the previous close of Rs.98.10. The 11.3 per cent'10 security ended at Rs.101.90 (101.74), while the 11.4 per cent'08 bond closed at Rs.103.30 (103.27).

Thursday, 21st December, 2000

Call money was barely traded on Thursday, amid the one-day bank strike called by employees of public sector banks. Attendance on the treasury desks of these banks was thin, which led to no quotes being generated during the day. There were one or two deals between 8 and 9 per cent and that too from private or foreign banks.  Otherwise, the call money market came to a standstill. Bond prices came down by 50-60 paise, reacting to an announcement of twin bond auction by the Reserve Bank of India (RBI) for December 26. The selling was more pronounced in the long tenor bonds. The RBI will re-issue the 11.43 per cent 2015 bond for Rs.3,000 crore through a price-based auction. It will also sell a fresh issue of the 20-year paper through an yield based auction.  Reserve Bank of India (RBI) received no bids at the daily repo auction held under the liquidity adjustment facility.  The 11.03 per cent 2010 security ended at Rs.101.74 (101.97), the 11.4 per cent 2008 bond closed at Rs.103.27 (103.10).

Wednesday, 20th December, 2000

Call money rates ended higher at 8.5-8.75 per cent, amid outflows of around Rs.8,000 - 9,000 crore from the system towards payment of advance taxes. The call rates ended at 8.4-8.6 per cent on Tuesday. The overnight rates opened at 8.5-8.75 per cent, in anticipation of the outflows. There was demand for funds, as players were concerned about tightening of liquidity in this week. The call rates remained range-bound for most part of the day. Reserve Bank of India (RBI) received no bids at the daily repo auction held under the liquidity adjustment facility. Most deals took place between 8.5 and 8.6 per cent during the day. Bond prices fell by 5-10 paise during the day, amid profit-booking by players. 

Tuesday, 19th December, 2000

Call money rates ended steady at 8.4-8.6 per cent amid adequate supply of funds. The overnight interest rates opened at 8.4-8.6 per cent, unchanged from Monday's close. The call rates remained range-bound for most part of the day. Reserve Bank of India (RBI) received no bids at the daily repo auction held under the liquidity adjustment facility. Around Rs.8,000-9,000 crore is expected to leave the system during the coming fortnight for payment of advance taxes. Most deals took place between 8.3 and 8.5 per cent during the day. Bond prices rose by 40-50 paise in the morning session, buoyed by firmness of the rupee in the forex market. Securities fell during the later part of the session, on profit-booking leaving the gain as 10-15 paise. There was good buying in long tenor securities, amid strengthening of the rupee against the dollar deal. The 11.03 per cent 2012 bond closed at Rs.98.34, after touching an intra-day high of 98.50.

Monday, 18th December, 2000

Call money rates ended steady at 8.4-8.6 per cent, on demand for funds met by adequate supplies. The interest rates opened at 8.6 per cent, as against previous close of 8.4-8.6 per cent. Reserve Bank of India (RBI) received no bids at the daily repo auction held under the liquidity adjustment facility. There was no pressure to cover positions ahead of the outflows for the advance taxes. Around Rs.8,000-9,000 crore will leave the system during the coming fortnight for payment of advance taxes. Most deals took place between 8.3 and 8.5 per cent during the day. Bond prices rose by 50-60 paise, buoyed by firmness of the rupee in the forex market. The market also drew comfort from a statement by RBI governor Bimal Jalan that the cost of borrowing for the government was still high. Dr.Jalan, however, ruled out any interest rate cuts in the short term. The market took this statement as a signal that the RBI may slash the key interest rates in the coming months.

K.Venu Babu