MUMBAI, July 1: The Reserve Bank of India has signalled a steep hike in the short-term and medium-term interest rates on Wednesday by hiking the coupon on three-year and five-year government stocks at the triple bond auction.In another late night move, the RBI sent a signal that it wants interest rates to remain on the lower side by pegging the yield of the 11.19 per cent 2005 at 11.88 per cent down from 11.94 per cent in the secondary market of the seven and the eight year paper.Despite the raise in coupon rates, the RBI had to take 32 per cent devolvement in the three-year paper and another 48 per cent on the five-year stock indicating that there is not much of liquidity in the system. The 12-year paper sailed through with no devolvement on the RBI as insurance companies and provident funds have put in money.
The Rs 100 crore 364-day treasury bill also devolved totally on the RBI earlier in the day. The cut-off yield remained at 8 per cent. With the massive devolvement at today's auction, the level ofmonetisation with the Reserve Bank has touched Rs 16,000 crore.
The central bank fixed the coupon of the three-year paper at 11.55 per cent up by 10 basis points compared to the secondary market, the five year at 11.75 per cent up by 65 basis points over the last auction on April 6. It has pegged the 12-year paper coupon at 12.25 per cent. The coupon of the five-year paper at 11.75 per cent was the same that the central bank offered on six-year and eight-year papers at earlier auctions.
Dealers said that the RBI has to cut banks' cash reserve ratio (CRR) by 100 basis points to infuse a fresh dose of liquidity in the system. The five per cent repo also received a paltry Rs 5 crore today. "Call rates will be under tremendous pressure tomorrow. In this fortnight there are no major inflow and there is a net outflow of Rs 1500 crore which will only add fuel to the fire," an analyst in a leading brokerage house said.
"The results show that interest rates are firming up considerably and banks will notsubscribe to any more government paper as there is fear of heavy depreciation at the end of the year," executive vice president (treasury) at ICICI Bank P H Ravikumar said.
At the auction of the Rs 2500 crore three year paper auction, the RBI received 112 bids for Rs 1,965 crore and it accepted 102 bids for Rs 1688 crore at the cut off yield of 11.55 per cent. The devolvement on the RBI was Rs 812 crore and the weighted average yield was 11.50 per cent.
The Rs 2000 crore five year auction received 63 bids for Rs 1193.69 crore out of which Rs 48 bids for Rs 1039.69 crore were accepted. The cut off was 11.75 per cent and the devolvement on the RBI was Rs 960.31 crore. The Rs 1000 crore 12-year paper saw 49 bids for Rs 1414 crore being received by the RBI. With this the government has completed nearly Rs 41,000 crore of a gross borrowing programme of Rs 79,000 crore.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
