RBI intervention checks Re

MONEY MARKET ROUND-UP

Money: Call rate fall
The surplus liquidity prompted the Reserve Bank of India to absorb around Rs 26,180 crore from the market under reverse repo. There was an outflow of around Rs 30,000-35,000 crore from the system last week on account of advance tax outflows.

The call rates fell below 6 per cent to close around 5.50 per cent. In the collateralised lending and borrowing market, the interest rates fell below 5 per cent to rule around 4.40 per cent. In CBLO, the banks borrow against the collateral of government securities.

G-Sec: Down on outflow concerns
Even with surplus liquidity, the government securities fell by 20-40 paise across maturities. The market was apprehensive of outflows towards the auction of dated securities and treasury bills under the market stabilisation scheme.

The Reserve Bank of India will be auctioning treasury bills worth Rs 5000 crore and dated securities to the tune of Rs 10,000 crore for absorbing the excess liquidity from the system.

"Due to appreciation of the rupee against dollar following heavy inflows into the Indian market, the RBI has been intervening aggressively in the foreign exchange market to buy dollars. This is generating excess rupee liquidity", said a dealer.

The market is however apprehensive of the liquidity situation and thus the trading sentiment was cautious. Yields went up by 12 basis points in the short term government papers, while the medium and long term papers saw the yields firming up by 3-5 basis points. The yield on the benchmark ten year paper closed at 7.91 per cent as against 7.86 per cent on Monday.

The cut off yield on the 91 day t-bill is expected to firm up in the auction to be held on Wednesday. The cut off yield on the 91 day t-bill came down to 6.98 per cent last week as against 7.10 per cent in the earlier auctions.

OIS and corporate bonds: Marginal upmove
The trading in overnight swap market tracked the lacklustre government securities. The overnight interest rate swap market is a derivative product based on the underlying of the interest rates on the government securities.

The MSS auctions have been a negative trigger for the market and this is reflected in the OIS rates, said a dealer. The rates in the benchmark maturities of one year and five year OIS moved up to 7.03 per cent and 7.11 per cent as against 6.94 per cent and 7.11 per cent respectively.

There were no major primary issues in the long term corporate bond market. However the market was abuzz with expectations that the government would issue oil bonds to rescue the oil companies from losses arising out of the rising crude prices.

In the short term, yields went up marginally. Oriental Bank of Commerce and Axis Bank raised money through certificate of deposits.

Global market: Euro, GBP corrects marginally
After moving up against the dollar, the euro and GBP marginally corrected on Tuesday. Euro and GBP ruled at $1.4108 ($1.4112) and GBP was at $2.0143 ($2.0250). The yen is hovering at $114.31($115.42), as the fear of carry trade is preventing it from appreciating.