Call rate firm at 7% even as banks rush for funds

MONEY MARKET ROUND-UP

The call money rate ended steady at around 7 per cent today despite banks borrowing heavily because supply and overall liquidity in the banking system remained comfortable, dealers said.

The one-day call rate ended at 6.95-7.00 per cent compared with Saturday’s close of 7.05-7.10 per cent for two-day loans. Collateralised borrowing and lending obligations (CBLOs) ended at a weighted average rate of 6.11 per cent today compared with 6.31 per cent on Saturday.

The central government’s reimbursement of Rs 15,000 crore to banks last week under the farm loan waiver scheme announced in the Union Budget 2008-09 (April-March), has improved the liquidity condition, dealers said.

With the call money rate well below RBI’s repo rate, banks borrowed only Rs 5,220 crore through the central bank’s twin repo tenders today. In fact, they parked Rs 6,715 crore at RBI’s reverse repo window.

However, continuous depreciation of the rupee against the dollar has rekindled expectation of dollar sales by the central bank, putting a squeeze on liquidity.

Rupee: Range-bound

The rupee ended off its lows against the dollar today after moving in a narrow band for a major part of the day because banks sold the greenback for exporters and on their own account to trim long positions, dealers said.

The Indian unit ended at 50.12 to a dollar compared with 50.02 to a dollar on Friday.

For a major part of trade today, the rupee moved in tandem with the trend in local stocks, dealers said.

A large UK bank and a large US bank were major sellers of the dollar around the level of 50.2500 to a dollar, dealers said.

G-sec: Prices drop
Government bond (G-sec) prices ended marginally down because investors booked profits, noting over a 2-rupee rise since the last week and after Finance Minister P Chidambaram’s comments indicated there may not be interest rate cuts immediately, dealers said.

The most traded 8.24 per cent, 2018 gilt ended at Rs 107 or 7.2013 per cent yield-to-maturity compared with Rs 107.10 or 7.1873 per cent yield on Friday.

The headline inflation has been consistently falling for the past nine weeks and fell to 8.90 per cent for the week to November 8 from 8.98 per cent a week ago.