G-sec prices drop as traders stay away

MONEY MARKET ROUND-UP

Prices of government securities (G-sec) ended down on day because most investors preferred to stay light before the big auctions on Friday, dealers said.

The Reserve Bank of India will sell Rs 60 billion of 8.24 per cent, 2018 paper and Rs 40 billion of 8.28 per cent, 2032 gilt on Friday under the government's regular borrowing plan.

 

The 8.24 per cent, 2018 paper settled at Rs 101.72 or 7.9840 per cent yield to maturity on Wednesday, compared with Rs 101.99 or 7.9447 per cent on Tuesday.

Call rates: In a range

The call rates ended steady on Wednesday as liquidity was adequate to meet banks' reserve needs. The one-day call rate ended at 6.05-6.10 per cent compared with 6.00-6.10 per cent on Tuesday.

The banks' subscription for the Reserve Bank of India's reverse repo tender stood at Rs 271 billion on Wednesday, up from Rs 232 billion on Tuesday, an indication of the surplus cash position.

CBLOs fell to an intraday low of 4.80 per cent. They traded at a weighted average rate of 5.56 per cent on Wednesday, down from 5.81 per cent on Tuesday.

Corporate bonds: Yields up on cash crunch fears

Yields firmed up by 1-2 basis points as most market participants chose to remain on the sidelines on Wednesday on expectations that liquidity will tighten next week.

SBI's upper tier-II bonds traded at 9.56 per cent compared with 9.54 per cent on Tuesday. Buyers shunned long-term bonds anticipating tighter liquidity next week after the last of the series of 25 bps hike in cash reserve ratio takes effect on May 24. This hike will drain Rs 90 billion from the banking system.