Bankers rush for funds
MONEY MARKET ROUND-UP
A tight liquidity situation further accentuated on Wednesday, leading to the Reserve Bank of India (RBI) infusing around Rs 35,000 crore into the market.
According to dealers, the rush for funds was not so much for meeting the cash reserve ratio (CRR) requirement on the reporting Friday. Instead, banks were preparing to mop up funds to meet the demand during the long weekend and festive season loans.
The call rate, at which banks lend and borrow funds from each other for their daily requirement, closed at a high of 9.45 per cent. This has led to an inverted yield curve in the market. An yield curve for the government paper is a graphic representation of yields for corresponding maturities of government papers.
While the call money (overnight funds ) are available for 9.45 per cent, the one-year funds are available at 9.29 per cent (the yield for the 364-day T-bill) as against 9.09 per cent for the ten-year funds (the yield for the ten-year government paper).
Corporate bonds: Funds get costlier
Banks, non-banking finance companies (NBFCs) and other firms are increasingly finding it difficult to raise funds. According to dealers, the tightness is arising from a lack of participation from mutual funds. Mutual funds prefer to invest in the collateralised borrowing and lending obligations market (CBLO) since the one-day fund is offered at 8.45-9 per cent. CBLO is a money market instrument for non-banking entities.
State Bank of Bikaner and Jaipur and State Bank of Travancore offered 10.50 per cent for one-year funds through a certificate of deposit (CD). Some banks even paid 11 per cent for three-month funds.
Forex: Re weakens