MONEY MARKET
Rates in the inter-bank call money market remained below one percent levels on reporting Friday. The rates are expected to be stable for the new fortnight also.
It was reported that a large number of banks stayed away from borrowing in the call market on Friday.
The banks do not borrow funds in the market on a reporting Friday .
This is becasuse they are required to maintain cash reserve ratio requirements for the next fortnight on these borrowings also.
Call money rates were reported to be hovering between 0.25 percent and 0.5 per cent in Friday's trading.
In government securities transactions, the trading activity was not very hectic.
There was some interest in the new 13.62 per cent 1998 security. The Zero coupon bond maturing in 2000 saw a yield of 13.86 per cent.
The new 13.62 per cent 1998 paper was trading at a discount in the secondary market.
It is expected that the new fortnight will see rates between 3-4 per cent.
Money which had been put into 91-day treasury bills `on tap' has come into the banking system.
This will help the banks to maintain their liquidity. It is expected that the 14-day `on tap' paper will again be subscribed as the rates have been below 1 per cent.
The 91-day treasury bill auction saw a drop of 42 basis points from the previous week.
While a total of 81 bids were received, only 6 were accepted at the new cut off level of 9.06 per cent.
It was reported that most of the accepted bids were those of primary dealers.
The new cut off rate of the 91-day paper took the market by surprise.
Last week's auction saw the cut-off yield at 9.48 per cent.
The previous auction saw the rates at 9.23 per cent, down by 68 basis points from the previous cut off. I-Sec has reported that auction yields below 10 per cent look unsustainable especially so with secondary market yields at 9.75 per cent
