Weekly Money Market Report : Dec 25th- 29th

The call money rates ended rising in the week. The rates opened the week at 10-10.05 % and ended at 10-10.25%. The market saw in last week an outflow of Rs.8000-9000 crore towards the payment of advance taxes. RBI re-issued the 11.43% 2015 bond for Rs.3000 cr through price based option. It also auctioned 20 year bond stock through yield based auction for Rs.1000 cr. Advanced tax outflows and a shortened reporting period due to the intervening holidays tightened liquidity caused rates to rise even on a reporting Friday. Banks report their reserves position every alternate Friday. The detailed report follows:

Friday, 29 th December, 2000

Call money rates opened around 8.25-8.5% and steadily rose to 10-10.25% at the finish due to borrowing by private and foreign banks to cover reserve positions in the absence of a major lending participant. Sustained demand for funds pushed up rates to above 10% despite the RBI infusing around Rs.580 crore into the system through the reverse repurchase of securities (repos) at 10%. Advanced tax outflows and a shortened reporting period due to the intervening holidays tightened liquidity caused rates to rise even on a reporting Friday. Banks report their reserves position every alternate Friday and keep 8.5% in the form of cash reserves for the following two week reporting cycle.

Thursday, 28th December, 2000

Holiday

Wednesday, 27th December, 2000

Call money rates ended lower at 8-8.4 per cent, amid infusion of Rs.4885 crore by the RBI through reverse repos. The overnight rates opened higher at 10.4-10.8% as against the previous close of 10-10.25%. There was heavy demand for funds as players expected liquidity to tighten following the outflows for bids accepted at the 15 year bond auction. The call rates closed after RBI pumped in funds through reverse repos. For 2 day reverse repos, RBI accepted all the 40 bids received for Rs.4885 cr at a cut off rate of 10%. The call rates touched an intra day high of 10.85% on demand for funds to cover the residual positions. RBI auctioned the 11.43% 2015 bond on Tuesday for Rs.3000 cr, the 20 year bond which was auctioned for Rs.1000 cr devolved entirely on RBI. RBI fixed a cut off price of Rs.99.82 for the 15 year bond. The bond rose on good buying support and ended at 100.40. The 11.03% 2012 security ended at 98.49(98.25).

Tuesday, 26th December, 2000

Call rates ended firmer at 10-10.25% amid higher demand for funds ahead of the twin bond auction. The rates opened at 10-10.05% as against the previous close of 9.75-10.25%. Demand for funds remained high but infusion of funds by RBI through reverse repos brought the call rates down towards the close. The market had factors in last week's outflow of Rs.8000-9000 crore towards the payment of advance taxes. RBI pumped in Rs.4660 cr by accepting 42 bids at a cut off rate of 10% out of 43 bids for Rs.4810. Call rates touched an intra day high of 10.7% on good demand. RBI re-issued the 11.43% 2015 bond for Rs.3000 cr through price based option. It also auctioned 20 year bond stock through yield based auction for Rs.1000 cr. Bond prices fell marginally by 5-10 paise on selling pressure ahead of the auction. The 11.03% 2012 security ended at 98.25(98.19), the 11.3% 2010 security at Rs.101.87(101.9) while 11.4% 2008 bond closed at 103.19(103.3). The rupee's gain in the forex market did not aid the bonds to recover. The rupee ended on 46.645/ 6525 per dollar as against Fridays close of 46.66/67.

Monday, 25th December, 2000

Holiday

K.Venu Babu