Liquidity in abundance as outflows are back

MONEY MARKET ROUND-UP

 G-sec: Buckling under pressure
The market reeled under pressure due to treasury bills and government securities auctions announced by the RBI to mop up the excess liquidity.

 The RBI will absorb around Rs 23,000 crore this week by issuing dated securities and government securities under the market stabilisation scheme and government borrowing programme and through a separate borrowing programme of Rs 10,000 crore.  The excess liquidity has also triggered fears of a hike in cash reserve ratio, which is a proportion of the deposits mobilised by banks and maintained with the RBI every fortnight.  The yield on the benchmark ten-year government security - 7.99 per cent 2017 closed at 7.99 against 7.98 per cent last week. Excess liquidity pulled down the yields on short term government papers and treasury bills. The yield on the 91 day T-bill fell to a low of 6.60 per cent after closing last week around 6.94 per cent.

 OIS: Yields give way
Excess liquidity brought down the yields on the overnight interest rate swaps, that are used by banks to hedge their interest rate exposure. However, the fall was restricted by concerns about the anti-inflationary measures that may be adopted by the RBI to check inflation.

 Yields across maturities came off by 5-8 basis points. One basis point is one hundredth of a percentage point. In the OIS market, banks strke deals to pay floating rate and receive fixed rate of interest on the interest rate liabilities. Overnight interest rate swap market is a derivative product based on the underlying of the interest rate on the government securities  In the corporate bonds market, there were not many primary issuances either in the short-term or longer-term maturity. According to dealers, the outlook on interest rates in uncertain and the strong liquidity situation could leade to a CRR hike. There were not many secondary market transactions in corporate bonds.  Rupee: Losing sheen   The spot rupee opened at 39.91/92 and fell to a low of 39.96/97 following heavy demand from the oil companies to book the future oil payments.

There were no fresh inflows into the market. The annualised premia for six month ad one year forward dollars closed at 2.18 per cent and 1.59 per cent respectively.