No rush at repo window as liquidity eases

MONEY MARKET ROUND-UP

The liquidity concerns have declined drastically ahead of the Friday of the reporting fortnight when banks apprise the Reserve Bank of India about their CRR requirements.

The market borrowed only Rs 3060 crore from the Reserve Bank of India under the repo window, compared to Rs 45,000-50,000 crore last week.

The call rates at which banks lend and borrow funds from each other for their daily requirements hence fell to a low of 6.25 per cent as against the highs of 9.50-9.75 per cent seen earlier.

According to dealers, the banks already covered their CRR requirements in the first week and are not in a hurry to raise funds. The cash reserve ratio is the portion of total deposits garnered by banks over a fortnight and deposited with the RBI as a statutory obligation. Out of the total funds to be maintained, a bank needs to have at least 70 per cent on any given day of the fortnight.

G-sec: Lacklustre trading

The prices of government securities remained flat. There was buying demand towards the fag end of the trading session. The yield on the benchmark ten-year paper closed flat at 9.32 per cent. However, there was good demand for treasury bills, especially from mutual funds and foreign banks managing funds on behalf of the foreign institutional investors (FIIs).

This is because when the ten-year bond trades at 9.32 per cent, T-bills for three months and one year are available at 9.30 per cent and 9.40 per cent respectively. In yield terms, these are good investments. Moreover, the fund or the banks need not provide for market loss.

Rupee: Weak close

The spot rupee traded in a narrow band of 42.37-42.44 throughout the day after opening at 42.43/44 to a dollar. However towards the end, heavy buying demand from the oil companies led the spot rupee to depreciate and close at 42.57/58 to a dollar.

At every dip in rupee dollar exchange rate, exporters sold dollars and this led to dollar paying in the forward market. The annualised premia for six month and one year forward dollars eased and closed at 4.68 per cent and 3.96 per cent as against 5.01 per cent and 4.17 per cent respectively on Wednesday.