Call rates touch 9.5% as banks hold on to funds

The interbank call money rates touched a high 9.5 per cent, as banks preferred to hold on to their funds on the last day of the financial year 2010-11.

Five-day call money rate ended at 9.00-9.25 per cent, compared with 7.20-7.25 per cent on Wednesday for one-day borrowings. On Thursday, the rate was for five-day loans, as banks would be shut on Friday due to the beginning of the new financial year and on Monday on the occasion of Gudi Padva festival.

“The supply was low since it was the last day of the financial year and only few banks borrowed on Thursday,” said a treasury official of a public sector bank.

The repo drawdown from the Reserve Bank of India (RBI) liquidity adjustment facility was above Rs 1 lakh crore, as banks borrowed to meet regulatory requirements for the financial year 2010-11.

11-YEAR BONDS SET FOR DROP
Eleven-year bonds headed for a second quarterly decline as the central bank boosted borrowing costs twice this year to help counter accelerating inflation.

Yields were near a one-week high on speculation of a resumption of debt sales at the start of the new financial year next week, following a two-month hiatus, will depress demand for existing notes. The finance ministry will sell $2.7 billion worth of debt before April 8.

“Inflation concerns persist and that is reducing appetite,” said Debendra Kumar Dash, a fixed-income trader at Development Credit Bank in Mumbai. “Bonds are lower as investors are probably making room for new debt.”

RUPEE MAY ADVANCE
The rupee is headed for a second monthly advance, as overseas investors boosted holdings of the nation’s stocks to take advantage of the economic growth outlook. Funds based abroad bought $1.3 billion local equities more than what they sold this month through March 29, according to exchange data. The country’s $1.3-trillion economy will expand as much as 9.25 per cent in the financial year starting April 1, the most since 2008, the government forecast last month.

“The rupee’s positive bias is supported by stock inflows, which should continue as economic prospects stay healthy,” said Roy Paul, deputy general manager at Federal Bank Ltd in Mumbai.