Liquidity comfort keeps govt papers buoyant
MONEY MARKET ROUND-UP
| On Friday, the central bank had announced auction of Rs 5000 crore worth 6.65%, 2009 paper under the Market Stabilisation Scheme on Wednesday, which was in line with the market expectations. |
| "There is demand, and with funding available at low levels, there is no reason for the market to go down," said a dealer with a private bank. |
| Overnight rates continued to trade near zero percent levels and the low call rate spurred demand for government bonds. |
| The most tracked 7.49%, 2017 paper rose to Rs 97.18 (7.9077%) towards the fag end of trade compared with Rs 96.99 (7.9352%) on Friday. |
| Outflows from auctions scheduled this week are not expected to dent liquidity, which is seen remaining comfortable due to continuing dollar purchases by the Reserve Bank of India, government spending, and coupon inflows. |
| "Auctions this week are like a drop in the ocean of liquidity," said a dealer with a European bank. |
| A section of dealers feel the market should move in a narrow band till some kind of clarity emerges on liquidity and interest rates. |
| "People are groping in the dark and wondering as to why RBI is letting overnight rates remain at such levels and system awash with liquidity," the dealer at the European bank said. |
| OUTLOOK On Tuesday, gilts are expected to open flat as investors may avoid taking new positions till Wednesday's gilt and Treasury bills auctions. |
| The central bank will sell Rs 4000 crore of 91- and 364-day T-bills on Wednesday. It will also sell Rs 5000 crore of 6.65%, 2009 paper under the MSS. Overnight movement in US Treasury yields and global oil prices could influence opening trade in local market. |
| In rest of trade, the 7.49%, 2017 paper is seen between 7.91 and 7.92% band. |