Overnight rates stay firm amid weekly bond auctions
Overnight rates stay firm amid weekly bond auctions
Overnight rates stayed firm amid the weekly auctions of government bonds, treasury bills and state development loans, which touched high of 8.9%, according to Clearing Corporation data with the weighted average rate at 8.45%, marginally lower than its previous close. According to market participants, despite the central bank wanting the overnight rates to be aligned with the repo rate, which is at 8%, the rate remained high as liquidity is yet to be infused by Reserve Bank of India (RBI) by open market operations.
The street believes if the call rates continue to hover higher, soon RBI will announce liquidity easing steps.
In the post-monetary policy conference call with analysts and researchers RBI governor Raghuram Rajan had said that, "As far as the short-term liquidity goes, let me repeat that our intent is as far as possible to try and ensure that the call money rate hugs the repo rate."
According to the dealers, banks are also borrowing more through call money because this is the first week of the Reporting Fortnight. Few experts also opined that RBI may have sold dollars to arrest volatility in the rupee due to which liquidity tightened. The tightness in liquidity is despite government spending which happened earlier this month.
"These auctions are keeping call rates on the higher side because liquidity is getting drained out. On an average call rates may trade in the range of 8.50-9%," said Balginder Singh, a dealer at Andhra Bank.
As per the calendar released in March, in every week of April there are treasury bills auction for Rs 15,000 crore. Besides that the indicative quantum of total market borrowings by the state governments and the Union Territory of Puducherry, for the quarter April-June, is pegged in the range of Rs 45,000 crore to Rs 50,000 crore. And last week RBI auctioned government bonds for the highest amount ever at Rs 20,000 crore. These auctions are draining out liquidity from the system.
"If the call rate volatility that we have seen today persists for a few days then we may see some action on liquidity from RBI in accordance with their guidance of keeping call rate anchored to the repo rate," said Suyash Choudhary, head-fixed income, IDFC Mutual Fund
According to the street RBI may announce term repos as Open Market Operation (OMO) purchase of government securities are reserves for occasions where the liquidity deficit is structural in nature.
Business Standard
Thanking you
Regards,
Rajesh Kumar Kathpalia ¤ SMC Global
17,Netaji Subhash Marg,Daryaganj,
New Delhi-110002 Mobile No 9891645052
Email Id: rajesh.ipo@smcindiaonline.com
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Overnight rates stayed firm amid the weekly auctions of government bonds, treasury bills and state development loans, which touched high of 8.9%, according to Clearing Corporation data with the weighted average rate at 8.45%, marginally lower than its previous close. According to market participants, despite the central bank wanting the overnight rates to be aligned with the repo rate, which is at 8%, the rate remained high as liquidity is yet to be infused by Reserve Bank of India (RBI) by open market operations.
The street believes if the call rates continue to hover higher, soon RBI will announce liquidity easing steps.
In the post-monetary policy conference call with analysts and researchers RBI governor Raghuram Rajan had said that, "As far as the short-term liquidity goes, let me repeat that our intent is as far as possible to try and ensure that the call money rate hugs the repo rate."
According to the dealers, banks are also borrowing more through call money because this is the first week of the Reporting Fortnight. Few experts also opined that RBI may have sold dollars to arrest volatility in the rupee due to which liquidity tightened. The tightness in liquidity is despite government spending which happened earlier this month.
"These auctions are keeping call rates on the higher side because liquidity is getting drained out. On an average call rates may trade in the range of 8.50-9%," said Balginder Singh, a dealer at Andhra Bank.
As per the calendar released in March, in every week of April there are treasury bills auction for Rs 15,000 crore. Besides that the indicative quantum of total market borrowings by the state governments and the Union Territory of Puducherry, for the quarter April-June, is pegged in the range of Rs 45,000 crore to Rs 50,000 crore. And last week RBI auctioned government bonds for the highest amount ever at Rs 20,000 crore. These auctions are draining out liquidity from the system.
"If the call rate volatility that we have seen today persists for a few days then we may see some action on liquidity from RBI in accordance with their guidance of keeping call rate anchored to the repo rate," said Suyash Choudhary, head-fixed income, IDFC Mutual Fund
According to the street RBI may announce term repos as Open Market Operation (OMO) purchase of government securities are reserves for occasions where the liquidity deficit is structural in nature.
Business Standard
Thanking you
Regards,
Rajesh Kumar Kathpalia ¤ SMC Global
17,Netaji Subhash Marg,Daryaganj,
New Delhi-110002 Mobile No 9891645052
Email Id: rajesh.ipo@smcindiaonline.com
--
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To unsubscribe from this group and stop receiving emails from it, send an email to Productupdatesforamc+unsubscribe@googlegroups.com.
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