Forex inflows push up Re, liquidity improves

MONEY MARKET ROUND-UP

Backed by foreign exchange inflows into the equity market, the spot rupee opened at 41.06 after closing at 41.09/10 to a dollar on Tuesday. During the day, inflows helped it to close at 40.89.

 The market witnessed rangebound trading and banks pared positions anticipating the decision of Bank of Japan on Thursday. Market dealers expect that the Japanese Central banks may not take a stance to hike the interest rates but issue statements that may appreciate the currency.

The annualised premiums for the six-month and one-year forward dollars closed at 1.54 per cent and 1.61 per cent, respectively.

Money: Call at 6.20%
The outlook on the liquidity improved on Wednesday following the appreciation of the spot rupee on the back of foreign exchange inflows.

However, the bids submitted with RBI under reverse repo to park excess liquidity stood around Rs 13,000 crore. Call rates ruled at 6.20 per cent whereas the banks could borrow funds in the colltaeralised lending and borrowing market ( CBLO) at 5.75 per cent.

However the apprehension on tight liquidity today pushed up the yields on the the shorter end of the yield curve. The 91-day and 182"�day t-bills were auctioned at a yield of 6.81 per cent and 7.46 per cent as against market expectation of 6.76 per cent and 7.25 per cent, respectively.

G-sec: Prices move up

There was brisk trading in the government securities market following the improvement on the outlook on liquidity. Prices of government papers moved up by 30-50 basis points across maturities while the yield on the ten-year benchmark paper closed at 7.91 per cent, four basis points lower than 7.95 per cent on Tuesday.

The RBI auctioned two year paper 5.48 per cent 2009 at a cut-off yield of 7.9150 per cent as against market expectation of 7.94 per cent.

OIS and corporate bonds: Rangebound
Trading in the OIS market was rangebound with no major changes in the benchmark interest rates for the swaps. Five year and one year swap rates pegged to rupee interest rates ruled at 7.5150 per cent and 7.4950 per cent as against 7.54 per cent and 7.48 per cent on Tuesday.

The yield in the corporate bonds market shot up in the shorter end of the yield curve. While the yield on the ten-year triple-A bond continued to rule around 9.75 per cent, the rates on three month certificate of deposits went up from 7.50-7.75 per cent to 8/8.10 per cent UCO bank and Union bank of India raised three month money at 8-8.10 per cent .

Global markets: All eyes on BoJ meet
The global markets are eagerly anticipating the outcome of the he Bank of Japan meeting and the central bank's view on the Japanese interest rates.

The meeting is also expected to issue statements related to currency which could impact the yen carry trade.

Yen carry trade is swapping yen borrowings into dollar to invest in the global markets so as to take advantage of the lower interest rates in yen.

While GBP ruled at $1.9878 (1.9740), euro at $1.3490 ($ 1.3505 ) and yen is at $115 ($114.03).