Reserve Bank Announces Four-Day Repos Auction

This is seen as a move towards stabilising the rapidly crashing yields and maintaining some sort of consistency in the inter-bank call money rates. The bids will be accepted on November 4 up to 2:30 pm and the results will be announced the same evening. Payment by successful bidders will be on November 5 up to 2.30 p.m. and the repurchase by RBI on November 9.

It is expected that the cut off yields set by the RBI will be the rate around which the money markets will move in the coming fortnight. Tuesday onwards, rates in the inter-bank money markets should move up to 4-5 per cent from the present 2.5 per cent, a money market operator said.

 

Yields on shorter-dated securities should also start looking up instead of continuing its downward trend. It is a move towards strengthening open market operations and determining a range within which yields and the money market rates should move a dealer said.

The RBI has resorted to reverse repos in the past too. It is usually done towards the year-end when window-dressing of accounts usually takes place, said a dealer.

At yesterdays auction of the 91-day paper, the yield crashed to the years low of 6.94 per cent. This amounted to a drop of 192 basis points. Last weeks auction saw a dip of 121 basis points. The yield on the 91-day paper at last weeks auction stood at 8.86 per cent.