Weekly Money Market Report : Jan 01st - 05th

The call money rates ended low in the week. The rates opened at 10.5-10.75 % and ended at 9.3-9.6 percent. The central bank infused Rs.4800 crore into the system through the reverse repos agreements auctioned to meet the heavy demand of borrowing banks in the reporting cycle. Bond prices rallied through out December 2000 on account of heavy inflows from the SBI India Millennium Deposit (IMD) scheme. The rates came down below the 10% level after results of the liquidity adjustment facility (LAF) were announced. The Fed rate cut boosted bond prices, which rose by 60-70 paise in the long end and 30-40 paise in the short end. The cut strengthened hopes of easy interest rates during the last quarter of this fiscal. The US Federal Reserve slashed the federal fund by 50 basis points (BPS) to 6% and its discount rate by 25 basis points to 5.75%. Corporate bond yields also dipped, on good buying sentiment and stable market conditions. The detailed report follows:

Friday, 5th January, 2001

Call money rates ended lower at 9.3-9.6 per cent amid indications of softening of interest rates and easy liquidity in the system. The overnight rates opened at 9.5-9.8 per cent, as against Thursday’s close of 9.3-9.8 per cent. For three-day repos, the Reserve Bank of India accepted a single bid for Rs.400 crore, at a cut-off rate of 10 per cent out of two bids for Rs.425 crore. The bond prices ended slightly lower, as compared to Thursday’s close. The US Federal Reserve slashed the federal funds rate by 50 basis points to 6 per cent and its discount rate by 25 bps to 5.75 per cent. The call rates touched an intraday low of 9 per cent, but rose towards the end on some intermittent demand from players. The 11.43 per cent ‘15 bond ended at Rs.102.69 (102.70), the 11.03 per cent ‘12 bond closed at Rs.101.15 (101.20), the 11.3 per cent ‘10 bond at Rs.103.70 (103.60). Corporate bond yields also dipped, on good buying sentiment and stable market conditions.

Thursday, 4th January, 2001

Call rates ended lower at 9.3-9.8% amid improved liquidity with funds entering the system through RBI's reverse repos and refund of surplus tax paid by corporates in December. Call rates opened at 9.9-10.1% as against the previous close of 9.75-10%. RBI infused Rs.2,215 crore through reverse repos. The Fed rate cut boosted bond prices, which rose by 60-70 paise in the long end and 30-40 paise in the short end. The cut straightened hopes of easy interest rates during the last quarter of this fiscal. The US Federal Reserve slashed the federal fund by 50 basis points (BPS) to 6% and its discount rate by 25 basis points to 5.75%. The 11.43% 2015 bond ended at Rs.102.7 as against previous close of Rs.101.85. The 11.03% 2012 bond closed at Rs.101.2(100.43) the 11.43% 2010 bond at Rs.103.60(103). In the short end, 11.68% 2006 bond ended at Rs.105.5(105.2). Call rates were quoted at an intra day low of 9.25%, just after the results for the liquidity adjustment facility (LAF) were announced.

Wednesday, 3rd January, 2001

Call money rates ended steady at 9.75-10.1 percent after the RBI infused Rs.3,115 crore into the market through reverse repos. The rates opened at 9.9-10.1% as against the previous close of 9.75-10%. The rates touched an intra day high of 10.15 % on major demand for funds. The rates came down below the 10% level after results of the liquidity adjustment facility (LAF) were announced. The RBI accepted all the 18 bids received for Rs.3,115 crore at a cut off rate of 10%. Bond prices rose by 15-20 paise amid good inflows from coupon repayments and interest on cash reserve ratio (CRR) balances of banks held by RBI. The inflows from coupon repayments from RBI was Rs.500 crore which came in on Tuesday. The interest on CRR balances of another Rs.500 crore is expected to be trickled in during the next fortnight. The 11.03% 2012 bond ended at Rs.100.53(100.31), the 11.3% 2010 security ended at Rs.103.04(102.92) while 11.4% 2008 bond ended at Rs.104.206(103.98).

Tuesday, 2nd January, 2001

Call rates ended firmer at 9.75- 10% due to the mismatch between the demand and supply for funds. The overnight interest rates opened at 9.75-10% as against the previous close of 9-9.5 percent. RBI infused Rs.3,935 crore through reverse repos at a cut off rate of 10% and accepted all the 22 bids received at the auction. Bond prices declined by 10-15 paise amid profit booking by players at higher levels. The rupee's easing in the foreign exchange market affected sentiments in the bond market. The call rates ruled between 9.75-10% for most part of the day. Call rates ruled high amid liquidity concerns which came down after the announcement of Liquidity Adjustment Facility results. Bond prices rallied through out December 2000 on account of heavy inflows from the SBI India Millennium Deposit (IMD) scheme. The 11.03 % 2012 bond ended at Rs.100.31(100.29), the 11.3% 2010 security at Rs.102.92(102.80) while the 11.4% 2008 bond ended at Rs.103.96(104).

Monday, 01st January, 2001

Call rates ended lower as the central bank infused liquidity into the system through the reverse repos agreements auctioned to meet the heavy demand of borrowing banks in the reporting cycle. Call rates closed around 9.5- 9.75 percent following the RBI's infusion of Rs.4,800 crore into the system by way of repo reversals after call rates opened higher around 10.5-10.75% and traded actively in a range of 10.4-10.6%. RBI lent funds through the reversal repos at 10%. The heavy demand to cover reserve needs exerted pressure on funds and pushed rates above 10.5%, but the rates fell after the reversal repo liquidity hit the market. The market witnessed hectic activity and ended on a flat note. The secondary market for securities remained well bid, despite the early pressure on funds at the overnight call money market. The medium and long term securities rose by 20-40 paise.

K.Venu Babu