Prices of bonds fell across maturities, pushing up the yields by 7-8 basis points. The yield on the benchmark ten year paper closed at a high of 7.93 per cent after touching an intraday high of 7.97 per cent. It had ended at 7.87 per cent on Thursday. Similarly, the yield on the long-term benchmark paper 8.33 per cent 2036 closed at 8.37 per cent.
Liquidity remained tight, with the call rates rising to an intraday high of 8 per cent. The Reserve Bank of India has not issued any treasury bills or government securities for auctioning under the market stabilisation scheme (MSS) next week. The central bank absorbs excess liquidity from the system through MSS.
Call rate is the interest rate at which banks lend and borrow funds for their daily interbank operations. The call rates fell to a low of 6 per cent at close.
The RBI infused rupees to the tune of around Rs 19,640 crore, rather than absorbing excess funds. Under repo, the RBI infuses funds through purchase of government securities.
According to dealers, the liquidity has started tightening since the RBI hiked the CRR in three tranches to 8.25 per cent. Most banks have already started preparing for the reporting fortnight next Friday.
Reporting fortnight is when the banks have to keep a certain percentage of the deposits mobilised over a fortnight with the RBI as a statutory provision. Besides, there was no additional supply of liquidity, either in the form of heavy government expenditure or foreign exchange inflows.
