Call Rates Crash To Below 2%

The overnight interest rate in the inter-bank money market crashed to below 2 per cent. With call rates ruling easy, Rs 3,046 crore has been parked with the Reserve Bank through repos.

The spot rupee was range bound and closed at 38.73-75 against the dollar. In order to mop up liquidity, RBI continued to transact sell-buy swaps in the foreign exchange market.

According to market estimates, RBI would have intervened to the tune of $ 200 million. Despite the intervention, forward premia declined in line with the call rates.

On Friday, one month, three month and six month premia closed at 16.72 per cent, 18.76 per cent and 15.83 per cent respectively. Yesterday premia closed lower at 12.78 per cent, 15.85 per cent and 15.78 per cent.

 

On Saturday, the RBI had mopped up Rs 1,170 crore while it received 12 bids yesterday for Rs 1,876 crore at the 3 day 9 per cent fixed rate repos. There was an inflow of Rs 1,170 crore yesterday on account of second leg of repo deal transacted on Saturday.

Logically, the repo rate should act as a floor to the call rate. However this occurred because of the fact that banks have to submit their bids to RBI before noon.

If there are substantial inflows subsequently, then market is flush with funds and call rate would crash. According to market dealers one of the financial institutions was flush with funds yesterday and this brought down call rates.

After opening in the region of 9 - 9.25 per cent, call rates declined to 8.5 - 9 per cent. There was a sharp drop in the rates during the second session when rates came crashing down.

The weighted average call money rate of STCI was 6.92 per cent on a turnover of Rs 1,200 crore. In the morning there was some buying interest in securities.

Among treasury bills the ones maturing in April were dealt at 10.5 - 11.75 per cent. Among securities, the 13.50 per cent 1998 was traded at Rs 100.35, the 12.14 per cent 2000 at Rs 101, the 12.50 per cent 2004 at Rs 101.05 - Rs 101.05, and the 12.59 per cent 2004 at Rs 101.50.