RBI intervention stems Re rise
MONEY MARKET ROUND-UP
| Spurred by the foreign exchange inflows into the equity market, the spot rupee opened stronger at 39.66 to a dollar as against a closing of 39.73/74 on Tuesday. The inflows were due to portfolio investments by the foreign institutional investors and panic selling of dollars by the exporters. |
The rupee is overvalued by 16 per cent on the real effective exchange rate (an index based on combination of currencies as per trade weight). It is seen hovering within a range of five per cent either way. |
| Money: Call rates steady |
| There was ample liquidity, as the RBI received bids worth Rs 22,750 crore under reverse repo. The reverse repo enables the RBI to absorb excess liquidity from the system. Call rates closed around 6/6.10 per cent. |
| They had inched up to a high of 6.95 per cent during the day in stray deals. In the collateralised lending and borrowing market, the interest rate for borrowing funds against the collateral of government securities went below 6 per cent. |
| G-sec: Lacklustre trades |
| Trading in the government securities market was lacklustre during the day as the market prepared for an auction of government securities worth Rs 16,500 crore. |
| However, there was buying demand in the later part of the day after the RBI announced the cut off yield, in line with market expectations. |
| While the short and medium end of the yields curve were in demand, the prices fell in the longer term papers due to selling pressures. The short and medium term papers went up by 10-15 paise and the long papers fell by 5-10 paise. |
| The yield on the benchmark ten year paper closed at 7.89 per cent as against 7.91 per cent on Tuesday. |
| In the treasury bills, the RBI announced a cut off yield of 6.98 per cent and 7.50 per cent for the 91 day and 364 day bills as against 6.98 per cent and 7.47 per cent respectively in the previous auctions. |
| OIS and corporate bonds: Yield up on low volumes |
| Lacklustre trading and low volumes led to the firming up of yield in the OIS markets. The benchmark maturities of 1-year and 5-year papers witnessed a rise in yields, to 7.08 per cent and 7.26 per cent respectively as against 7.03 per cent and 7.11 per cent on Tuesday. |
| The secondary market trading in the corporate bond market was dull since the market was tracking the government securities market. Banks refrained from trading on fears of upsetting the yields towards the closing of the second quarter of the financial year. |
| Mutual funds played safe fearing redemption from the foreign institutions and banks towards the end of September ahead of the results season. The global markets are awaiting results as these could throw light on exposures of these banks in the subprime market, said dealers. |
| Global markets: Euro and pound rise further |
| Euro and GBP continued to move up against the dollar, hovering around $1.4128 ($1.4108) and $2.0160 ($ 2.0143). The yen also appreciated to a dollar by moving up to $115.33 ($114.31). |