Banks float CDs; Re ends low
MONEY MARKET ROUND-UP
| The corporate bond market witnessed issues of certificates of deposit (CDs), especially by foreign banks, amounting to a total of Rs 300-400 crore. |
| According to dealers, foreign banks are raising rupee resources to stay liquid, fearing an adverse impact of a liquidity crisis in overseas markets. Citibank, Rabo Bank and Deutsche Bank are some of the major issuers of CDs. |
| The interest rates on 3-month to 6-month CDs came down by 5-10 basis points to 7.85 per cent and 8.10 per cent respectively compared with the levels seen on Friday. |
| Other banks that raised money included State Bank of Hyderabad and State Bank of Mysore. |
| However, the corporate bond market at the longer end of the maturity remained dull and saw passive trading interest. |
| The overnight interest rate swap market, on the other hand, also witnessed a fall in yields since banks took comfort from the stability of call rates. The rates came off by 4-5 basis points to 7.54 per cent for the five-year maturity. |
| G-sec: Yields end flat |
| A recovery in the equity market was a source of comfort for market dealers on the liquidity front. While the market opened on a brighter note in the beginning, the end of the trading session saw prices falling across maturities by 5-10 paise. |
| The yield on the ten-year benchmark paper closed flat at 7.98 per cent compared with the weekend's close. Strong buying demand was not seen from banks since there is a net outflow of Rs 7,000 crore slated from the market this week. |
| Liquidity: In comfort zone |
| Rupee liquidity remained comfortable as the RBI absorbed around Rs 25,000 crore from the market against Rs 19,000 crore during the last weekend. Call rates, at which banks lend and borrow, closed at 6.15 per cent compared with the high of 6.25 per cent last Friday, whereas in the collateralised lending and borrowing market (CLBO), banks could borrow funds at 6.10 per cent. Volumes in the CLBO market were at Rs 33,000 crore as against Rs 17,000 crore in the call money market. |
| Forex: Re weakens |
| A recovery in the equity market across the globe led the spot rupee to open stronger at 40.57/58 as against a closing of 40.62/63 to a dollar last Friday. However, concern on the liquidity crisis, led the banks to swap rupees into dollars, which pushed it down to close at 40.62/63 to a dollar. |
| Since the worries on rupee liquidity were put to rest, at least temporarily, given a surplus liquidity of around Rs 25,000 crore in the market, the annualised premia on six-month and one-year forward dollars closed at 1.83 per cent and 1.87 per cent as against 1.92 per cent and 1.91 per cent last Friday. |
| Global markets: Dollar gains |
| Dollar-buying across markets led to major currencies such as the euro and the pound to lose against the dollar. While the euro closed at $1.3650 ($1.3660), the pound closed at $2.0145 ($2.0274). The yen, however, gained around $ 118.23 ($117.45). |