 "RBI, Reserve Bank of India")
The Reserve Bank of India (RBI) on Wednesday conducted two overnight variable rate reverse repo (VRRR) auctions of Rs 50,000 crore and Rs 25,000 crore as money market rates fell below the repo rate, said market participants.
The overnight weighted average call rate settled at 6.43 per cent on Wednesday. Repo rate currently stands at 6.50 per cent.
The RBI received bids worth Rs 20,860 crore at the first auction and Rs 1,337 crore at the second auction at a weighted average rate of 6.49 per cent.
“They want to keep the money market rates at the repo rate. These are fine-tuning operations,” said a dealer at a state-owned bank.
Meanwhile, the cut-off yield at the weekly Treasury bills (T-bills) auction softened as the liquidity situation eased compared to the previous week.
The liquidity deficit in the banking system stood at Rs 1.88 trillion on Tuesday, according to the latest data by the RBI.
The central bank set the cut-off yield on the 91-day, 182-day, and 364-day T-bills at 6.96 per cent, 7.17 per cent, and 7.12 per cent respectively. The cut-off yield on the 91-day T-bill was set five basis points lower. It was set two basis points lower on 182-day and 364-day T-bills than the last week.
However, the yield curve remains inverted with the 10-year benchmark yield trading lower at 7.07 per cent.
“The inversion will continue for some time as liquidity remains tight, and benchmark yield will remain at current level because the market has no cue,” said a dealer at another state-owned bank.
