MONEY MARKET REPORT
Security prices continued their downtrend yesterday with the market sentiment continuing to be bearish. The call money market was not functional yesterday on account of the strike.
The Reserve Bank of India (RBI) has announced a re-issue of two papers - Rs 2,500 crore each of 11.68 per cent 2006 and 11.10 per cent 2003. However, the announcement came too late for the market to react.
Security prices fell when trading opened in the morning, but recovered later in the day. Prices in the long-end fell by 12-15 paise, but recovered to some extent later in the day.
Prices in the short-end too fell by about ten paise, but managed to recover most of their losses.
"The sentiment is still negative to a certain extent," said a dealer with a private bank. Dealers say prices in the long-end are unlikely to recover soon.
Primary dealers (PDs) had taken devolvements in the last two auctions in the 2010 and 2020 maturities and many are reported to be still holding that paper.
"Unless the PD's actually get to unload some of this paper, we are unlikely to see a recovery in sentiment," said a dealer with a private bank.
"The market had been wondering whether the RBI would go for an auction or a private placement. The latter would boost sentiment. However, given that the RBI is going for an auction, it seems they are trying to make the best of the easy liquidity conditions," said a primary dealer.
Money Market Operations
* Call/Notice money markets
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Banks Primary Non-bank Total Weighted
dealers Institutions avg. rate (%)
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Borrowings 12,075 10,339 0 22,414 6.99
Lendings 12,944 2,326 4,214 19,484 7.06
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* Term money market Volume Rate
1,315 7.75-11.50
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* Liquidity support availed from RBI
Tier-I 8,579 7%
Tier-II 0 9%
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* RBI's open market operations Nil
* Outstanding RBI repos 3,000 5.00
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Today's Market
* Inflows
Coupon on GoI 5.75 per cent 2003 Rs 10.88 crore
Coupon on GoI 11.50 per cent 2006 Rs 302.47 crore
Coupon on GoI 7.50 per cent 2010 Rs 64.61 crore
Coupon on GoI 11.83 per cent 2014 Rs 10.88 crore
* Outflows NIL
* Expected call rates... 7-7.10 per cent
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