Funds strained; Re ends flat
MONEY MARKET ROUND-UP
| RBI infused funds worth Rs 21,580 crore into the system under repo. The liquidity situation tightened due to outflows towards the auction of government papers for the government borrowing programme and CRR hike by 50 basis points coming into effect from November 10. |
| The CRR is cash reserve ratio which is a proportion of deposit mobilised by the banks to be kept with the RBI as a statutory requirement. |
| The call rates and interest rates in the collateralised lending and borrowing market closed at a high of 7.70 per cent. |
| G-sec: Lacklustre volumes The volume in the government securities market remained lacklustre at around Rs 1,085 crore. |
| Foreign banks offloaded long term papers to shift investments to short term corporate bonds, commercial papers and certificate of deposits. This is done to earn higher returns on account of the high interest rate differential between gilt and corporate bonds. |
| While the prices of government papers remained ranged within a band of 3-5 paise, the yield on the ten year benchmark paper closed at 7.88 per cent. |
| OIS: Dull times There were not much volumes in the overnight interest rate swap market either, since it was tracking the underlying government securities market. |
| However since the liquidity outlook in the medium term is bullish, banks struck deals wherein they paid in fixed and received floating rate of interest on their existing products. |
| The interest rates in various maturities came down in the medium term swaps. The one year and two year swap rates have come down from 7.24 per cent and 7.13 per cent to 7.18 per cent and 7.09 per cent respectively. The five year swap rates, however, remained flat at 7.25 per cent. |
| There was brisk trading in the corporate bonds, where trading interest surfaced from foreign banks flush with funds. Foreign banks maintain funds on behalf of the custodian clients which act as FIIs in the equity market. |
| "Since the interest rate structure is flat in the government securities, investments in corporate bonds give good returns," said a dealer. |
| There was more interest in CDs and CPs, as these are short term in nature and give good interest rate differential. The one year CD rate has come down from 8.80 per cent to 8.60 per cent. |
| The trading interest was mainly confined to 15 days and one month commercial papers, which are being transacted at 8.20-8.30 per cent. |
| Volumes in the corporate bonds went up to Rs 17,000 crore as against Rs 4,860 crore on Wednesday. |
| Forex: Listless trading The foreign exchange market remained lacklustre as there were neither major FII inflows nor demand from importers. |
| The spot rupee opened at 39.31/32 and closed around the same levels. |
| The annualised premia for six month and one year forward dollars closed at 1.47 per cent and 1.20 per cent respectively. |
| Global markets: Dollar gains The dollar gained against all major currencies. The euro and GBP ruled at $1.4631 ($1.4730) and $2.0476 ($ 2.06) respectively, while the yen traded at $110 ($110). |