CBLO rates dip below 1%

MONEY MARKET ROUND-UP

Liquidity: In comfort zone
The market was comfortable on the liquidity front. But banks were wary of lending ahead of the reporting fortnight on March 28. The availability of ample liquidity was evident from the fact that the Reserve Bank of India (RBI) had to infuse only Rs 2,600 crore.

On the other hand, call rates closed at 6 per cent after falling to an intra-day low of 4 per cent. Banks have to maintain certain percentage of deposits as a statutory requirement with RBI on a fortnightly basis. This is known as CRR or the cash reserve ratio.

While call rates remained firm at 6 per cent, non-banking entities in the collateralised borrowing and lending obligation (CBLO) market were flush with funds and even lent at rates below 1 per cent.

Mutual funds (MFs), one of the major lenders in the CBLO market, are flush with funds as most banks have parked surplus money with MFs. Banks have raised funds to meet demands for the financial year-end.

G-sec: Bearish mood
The government securities (G-sec) market remained bearish and witnessed lacklustre trading interest. The prices remained flat and the yield on the ten-year benchmark paper closed flat at a 7.77 per cent.

Inflation remains a worry. Moreover, no bank want to take fresh positions ahead of the financial year-end. Most of the banks have already booked losses in portfolios that they had built ahead of the January monetary policy review anticipating interest rate cut, said a dealer.

Rupee: Ends flat
The demand for oil by importers pulled down the spot rupee to open at 40.18-20 as against the Wednesday's close of 40.14.

However, during the day, heavy dollar selling by companies as a part of the ECB proceeds led the spot rupee to reach an intraday high of 40.08-09 before closing for the day at 40.11-12. According to dealers, RBI bought dollars from the market to stem the rupee appreciation.

The annualised premia for the six-month and one-year forward dollars were at 2.09 per cent and 1.46 per cent as against 1.74 per cent and 1.29 per cent following a higher demand from oil companies to book dollars.

OIS and corporate bonds: Dull market
The long-term segment of corporate bonds remained lacklustre, both in the primary and secondary segments.

However, the shorter end of the maturity was active with primary issuance and trading in the secondary market. Following an improvement in liquidity, interest rates for the certificates of deposit (CDs) fell.

Compared to high rates of 9.50-9.75 per cent for one year, rates have mellowed down to 8.75 per cent to 9 per cent. Taking the opportunity, banks raised funds with one-year CDs.

Punjab National Bank paid 9.20 per cent, while State Bank of Bikaner and Jaipur offered 9 per cent. State Bank of India was in the market to raise one-year funds at 8.75 per cent.