Call Seen In 15-20% Band

MONEY MARKET

Interest rate in the inter-bank overnight money market is expected to rule between 15-20 per cent.

On Saturday, rates had fallen to seven-eight per cent. Repo deals had been struck for the rest of the fortnight at slightly over 20 per cent.

Security prices also recovered with the 13.50 per cent paper maturing in 1998, the 13.62 per cent 1998, the 12.50 per cent 2004 and the 12.59 per cent 2004 dealt at par and above.

The treasury bill maturing on April 10 was traded at 11-11.5 per cent.

But there is uncertainty on whether these price levels can be sustained if call rate move up during this week.

 

Till the fag end of the last fortnight call rate is ruling in the 50-80 per cent band.

The decline in call rate is on account of secular inflow of funds following Reserve Bank of India (RBI) intervention in the forex market through buy-sell swaps on a cash basis, coupon flows and maturing of treasury bills.

Given that call rate were ruling high, the RBI did not receive any bids at the nine per cent fixed rate repos on any of the days last week. The RBI hiked the yield on the 14-day treasury bills from 7.06 per cent to 7.32 per cent and raised Rs 320 crore at the auction on Thursday.

Competitive bidders stayed away from the auction of the 364-day and 91-day treasury bills.

The apex bank did not raise any money at the auction on Wednesday while at the auction of the 91-day treasury bills against the notified amount of Rs 100 crore it received a non-competitive bid for Rs 25 crore. Hence there was a devolvement of Rs 75 crore on it.

Subsequent to the decline in call money rate from Wednesday on wards, prices of securities improved while the yields on treasury bills in the secondary market declined.

For instance on the wholesale debt market segment of the National Stock Exchange, the 13.50 per cent paper maturing in 1998 was traded at a weighted yield of 17.47 per cent on Wednesday as against 26.79 per cent on Tuesday.

Similarly among treasury bills, the 364-day treasury bill maturing on April 10, 1998, was traded at a weighted yield of 15.26 per cent as against 26.15 per cent the day before. On Thursday yields declined further albeit marginally.

During the course of the week, securities prices are not expected to decline and could appreciate if the movement on Saturday be taken as an indicator.

It should also be borne in mind that a chunk of treasury bills and short-term securities are blocked on account of repo transactions.