RBI intervention tames Re rise

MONEY MARKET ROUND-UP

Forex: Re premia up
Slowdown in the portfolio inflows and sharp correction in the equity market led the spot rupee to open at 39.31/32 to a dollar, similar to the levels seen last week.

Dealers had expected the spot rupee to open with a bullish note since the dollar has been losing against all major currencies globally.

Dollar selling by companies and exporters pushed the rupee up to 39.23/24. However, the RBI's aggressive intervention pulled the rupee down and it finally closed at the opening level of 39.31/32 to a dollar.

The rupee premia for booking the six-month and one-year forward dollars continued to remain high.

Money: Fears of tight liquidity
Despite surplus liquidity, the markets reeled under fears of tightening conditions. Liquidity is expected to tighten on account of a hike in CRR (Rs 16,000-17,000 crore) and outflow of Rs 8000 crore towards auction of government securities under government borrowing programme.

The Reserve Bank of India absorbed around Rs 22,000 crore from the system on Monday. Call rates closed at 6.10 per cent.

According to dealers, the market liquidity situation may start tightening after November 7/8.

G-sec: Dull trades
The government securities market was lacklustre due to liquidity fears as well. The banks booked profits by selling securities and remaining liquid, ahead of the auctions of treasury bills and government securities scheduled this week.

The bearishness surrounding liquidity was seen in the shorter end of the yield curve. The yields on the 182 and 364 day t-bills moved up to close at 7.45 per cent and 7.50 per cent as against 7.31 per cent and 7.45 per cent respectively last week.

The impact of liquidity concerns was subdued on the longer end of the yield curve. The yield on the benchmark 10-year security closed at 7.86 per cent as against 7.85 per cent last week.

OIS :Wait and watch
The overnight interest rate swap market (OIS) remained lacklustre as players waited for cues on the liquidity situation to operate. "The view is so uncertain at this point of time that foreign banks, which otherwise pay floating, preferred to pay fixed and receive floating," said a dealer.

The sentiment in the corporate bond market was also lacklustre. There was no primary issue either in the short term or the longer end of the maturity. There were fewer deals in long-term bonds.