Re rises to 9 1/2-yr high

MONEY MARKET ROUND-UP

Money: Overflowing liquidity

The system was awash with liquidity. The surplus liquidity was a result of RBI's increased intervention in the foreign exchange market to stem rupee appreciation by purchasing dollars. Liquidity was further boosted through government expenditure.

The call rates closed at 6 per cent, but the interest rates in the collateral lending and borrowing market (CBLO) fell to a low of 3 per cent.

The CBLO volumes far surpassed those in the call market since most of the non banking players, mutual funds and insurance companies lend in the CBLO market.

The call money market, on the other hand, is meant only for banks and primary dealers. Mutual funds are flush with funds as banks are investing in liquid schemes following low offtake in credit.

G-sec: Lacklustre trading

Despite the ample liquidity, the government securities market was lacklustre as a result of thin trading interest. Dealers attributed this to rising yields in the United States following the robust non farm payroll data and increased issuance of government papers under the market stabilisation scheme, in a bid to absorb liquidity.

The RBI announced a total issuance of around 30,000 crore this week towards government borrowing programme and MSS. The bearish sentiment led to lacklustre trading and prices of government securities fell across maturities by 10-50 paise. .

OIS and corporate bonds: Dull times

Tracking the lacklustre government securities market and apprehending a further rise in the yields of government papers, the activity in the overnight swap market was dull.

The overnight interest rate swap is a derivative product based on the underlying of interest rate on government securities. The one year segment was fairly active since most banks entered into deals to pay fixed and receive floating rates of interest.

The interest rates in the one year and five year segment closed a tad higher at 7.05 per cent and 7.40 per cent as against 6.98 per cent and 7.35 per cent.

The corporate bond market also remained quite, with stray deals happening in the seven year benchmark paper of Power Finance Corporation. However yields in the corporate bond paper were flat.

Bloomberg: The rupee rose to the highest in 9 1/2 years on increased demand as overseas investors bought a record amount of the country's stocks this year.

Global funds are stepping up equity purchases as Asia's fourth-biggest economy expanded at the fastest pace in almost two decades. The rupee has rallied 12.1 percent against the dollar this year, making it the second-best performer in the Asia-Pacific region.

Global market: Pound gains, euro, yen lose

While euro lost to dollar, pound gained. Yen, on the other hand, lost quite a bit since the interest rate outlook in Japan favours a status quo. Euro and GBP ruled at $1.4092 ($1.4109) and 2.0393 ($2.0343). Yen is at $117.48 as against 116.24 last week.