Call rates end lower

MONEY MARKET ROUND-UP

The call money rate ended soft today, despite the demand from banks to meet their daily reserve requirement, as liquidity remained ample.

The 1-day call rate ended at 0.40-0.50 per cent, compared with 0.50-0.60 per cent on Wednesday.

CBLOs ended at a weighted average rate of 0.06 per cent, compared with 0.05 per cent on Wednesday. Inter-bank repos were dealt at a weighted average rate of 0.23 per cent versus 0.24 per cent.

Demand was weak, as "most banks have also maintained products for Reporting Fortnight," said a dealer at a large state-run bank.

Banks had excess funds even after meeting their daily reserve requirements.

Some mutual funds avoided lending in CBLOs, as rates stayed at near-zero level. They preferred to invest in other money market instruments.

"Mutual funds are partially parking their excess cash in commercial papers and certificates of deposits rather than lending in CBLO," said Ashish Nigam, debt fund manager, DBS Chola Mutual Fund.

Some mutual funds prefer to sit on cash, he said, pointing towards low CBLO rates. Reserve Bank of India's persistent dollar purchases continued to increase the rupee funds in the banking system.

Dealers believe the RBI will announce a treasury bill or bond auction for Rs 50-60 billion under the Market Stabilisation Scheme on Friday.

OUTLOOK
The three-day call rate is likely to open around 0.50 per cent, despite slightly higher borrowings because of banks meeting their reserve requirements for the weekend.

Cash supply is expected to be ample because of recent dollar purchases by the RBI. An outflow of Rs 35 billion as payment for t-bills auctioned on Wednesday is unlikely to exert any pressure on the call rate, as Rs 44 billion flow in through redemption of t-bills. CBLOs are likely to be in the range of 0.05-0.10 per cent.