364-Day Bill Yield Drops, 14-Day Repos Announced

After the repos rate for 14 days is fixed, the RBI will have rates for four days, 14 days, 91 days and 364 days. This will give an yield curve for the short end of the market. The rate for four-day money has been pegged at four per cent, the rate for 14 days will be announced after the auction, 91-day paper yield has been fixed at 6.94 per cent, and 364-day treasury bill at 10.12 per cent.

The RBI announced a 14-day repos auction of dated securities. This is the second auction in one week by the RBI to draw out excess liquidity and stabilise sharply falling yields.

 

The 364-day bill yield dipped by 200 basis points from 12.12 per cent. The RBI received 63 bids for a total amount of Rs 1590.55 crore. The cut-off price was Rs 90.83. Fourteen bids wrere accepted by the RBI amounting to Rs 682.80 crore. The weighted average price worked out to Rs 90.96.

Prior to this the 91-day treasury bill had seen a drop of 192 basis points, from 8.86 per cent to 6.94 per cent, touching the lowest level this year. The drop is on account of the recent reduction in the CRR requirements of banks.

The 14-day repos auction is set for Saturday, the day the second 0.5 percentage point CRR cut becomes effective. This cut is expected to release around Rs 2,000 crore into the system. The repos auction will help suck out this excess liqudity and give an interest rate indication.

Dealers indicated that the repos auction is expected to see a cut of 7 per cent. Accordingly, call money rates are expected to tighten to around 8 per cent in the coming days. The four-day repos auction saw an outflow of Rs 932 crore at a cut-off rate of 4 per cent. Rates in the call market tightened to 6.75 per cent yesterday, on expectations of withdrawal of liquidity.

Most of the government securities witnessed a selling pressure yesterday. This marks a reversal of the trend prevailing earlier when a bull run was witnessed on all securities. There was a dip in the prices of some of the securities. The price of zero-coupon 2000 paper dipped by 20 paise and the 13.5 per cent 1997 paper fell by 18 paise.