What do one-day money, three-month money and one-year money have in common? Well, they have an identical cost structure. In fact, three-month money and one-year money have become cheaper than one-day money. Welcome to the convergence of rates across the maturity spectrum in the Indian financial world.
On Saturday, the secondary market yield of a one-year government paper (maturing in October 2002) dropped to 6.34 per cent. The primary market yield of a 364-day treasury bill early last week was fixed at 6.49 per cent. The yield of 91-day treasury bill in the secondary market is now hovering around 6.45 per cent. This is happening at a time when the one-day repo rate, which also acts as a floor rate for overnight call money, is pegged at 6.50 per cent.
