Rate hike hits G-sec; rupee rises to 42.35

MONEY MARKET ROUND-UP

The yield curve turned negative, with the 364-day T-bill (benchmark for the one -year paper) at 9.55 per cent and the 10-year benchmark paper at 9.32 per cent.

Dealers said the Reserve Bank of India’s decision to raise policy rates in its monetary policy review on Tuesday has hit the government paper yields across maturities. There are only sellers in the market to offload the portfolio and realign the investments to the new interest rates. At the auction of treasury bills on Wednesday, the cut-off yield on the 91-day T-bill rose to 9.36 per cent, 30 basis point higher than the cut-off rate last week. Similarly, for the 364-day T-bill, the cut-off yield went up to 9.55 per cent as against 9.44 per cent earlier.

Meanwhile, the rates for companies to raise funds have gone up across the board. Companies floated commercial papers for one year at 11.00/11.25 per cent. The interest rate for three-month certificate of deposit has gone up to a high 10.60-10.70 per cent.

Forex: Dollar drops

The spot rupee-dollar exchange rate witnessed heavy selling of dollars by the banks, both as part of inflows into the equity market and dollars to raise rupee funds. 

According to dealers, banks are in a rush to raise funds since the CRR requirement has gone up, triggering dollar sales.

The spot rupee opened at 42.52-53, rose to a high of 42.34 before closing for the day at 42.35/36 to a dollar. In the coming days, oil companies may rush to buy dollars, put pressure on the exchange rate.