Dollar demand pushes Re down
MONEY MARKET ROUND-UP
According to dealers, the demand for dollars was aimed at taking advantage of the arbitrage opportunity in the non deliverable forward (NDF) market. NDF is derivative instrument based on the rupee dollar exchange rate and operational in the overseas markets. |
| Market players were buying dollars from the Indian market and selling them in the overseas market. |
| There was a demand from the Indian companies as well, to meet the import payment demands. |
| In the forward market, the premia to be paid in rupees for booking future dollars came down as there was huge selling of dollars by the exporters. "At every dip in the rupee dollar exchange rate, exporters sold dollars to realise a better value", said a dealer. |
| The annualised premia for six month and one year forward dollars closed a tad lower at 1.31 per cent and 1.07 per cent as against 1.47 per cent and 1.15 per cent respectively on Tuesday. |
| Money: Stretched liquidity The liquidity position was extremely tight and hence the Reserve Bank of India had to infuse around Rs 23,000 crore into the system under its repo window. The acute shortage of funds pushed up the call rates to a high of 8.75 per cent, but they closed at 6.10 per cent towards the end of the day. |
| Call rate is the interest rate paid by the banks to each other to lend and borrow funds for fund management during the day. |
| Under repo, the RBI infuses liquidity into the system against the collateral of government securities from banks and primary dealers. |
| The liquidity crunch is due to outflows towards the auction of government papers for the government borrowing programme and CRR hike by 50 basis points with effect from November 10. |
| The CRR is cash reserve ratio which is a proportion of deposit mobilised by banks to be kept with the RBI as a statutory requirement. There was an outflow of around Rs 6000 crore towards state development loans for borrowing funds on behalf of seven states. |
| G-sec: Sentiment looks up The sentiment in the government securities market improved due to a slight moderation in the price of oil. |
| The prices of government papers across maturities went up by 5-30 paise across maturities. The papers in the longer end of the maturity moved up by 20-30 paise. The yield on the ten year benchmark paper closed at 7.90 per cent. |
| The RBI will be auctioning 91 day and 364 day treasury bills for Rs 6,000 crore. The market expects the cut-off yield to shoot up since the outlook on shorter term liquidity has been bearish due to the tight liquidity situation. |
| The market expects the 91 day t-bill to be auctioned at a yield between 7.48-7.53 per cent as against 7.31 per cent last week. The market did not witness much trades in short term papers. |
| OIS : Fast-paced trading There was brisk trading in the overnight interest rate swap market. Dealers explained that the market expects the liquidity situation to ease in the coming weeks and hence banks entered into deals to pay in floating and receiving fixed. |
| The yields across maturities, both in the shorter and longer end of the yield curve, eased. The three month segment witnessed yields coming down from 7.30 per cent to 7.20 per cent. |
| Similarly, in the one year segment, yields declined from 7.29 per cent to 7.23 per cent. Overnight interest rate swap market is derivative product based on the underlying of the interest rate on the government securities. |
| The corporate bond market remained lacklustre. Yields firmed up both in the short term and long term segment. The ten year benchmark bond of State Bank of India traded at 9.55 per cent as against 9.25 per cent a week back. |
| Yes Bank raised Rs 300 crore through one year certificate of deposit at 9 per cent. A week back, one year CD could raised funds at 8.30 per cent, said a dealer. Similarly, State Bank of Bikaner and Jaipur raised funds at 8.80 per cent through one year CD. |