Mumbai, Aug 17: The interbank call rate showed wide fluctuations moving between 2 and 10 per cent during the week ended on August 16. The rates opened on Monday at 4.5-5.25 per cent and thereafter firmed to trade largely between 8 and 10 per cent for most of the week barring Thursday, the reporting day, when the call opened at 2-3 per cent and touched a high of 8 per cent that day before settling at 3.5-4.5 per cent.

The firmness in the call rates were largely because of a Rs 3,000 crore government bond auction on Monday coupled with the 364-day treasury bill auction on Wednesday and the 91 and 14-day treasury bill auctions on Thursday.

The auctions drained Rs 6,425 crore in liquidity from the banking system. The call began to firm from Tuesday after the eight year bond auction on the previous day. Speculators took trading positions in the 12.59-per cent, 2004 bonds on the day of the new bond auction and that pushed up the call rates further on the following day as they switched to taking positions in the new 11.19-per cent bonds, 2005 during the week.

The call rates firmed because speculators funded their secondary bond purchases through call. The 11.19-per cent bonds jumped to 100.45 in off market deals on the day the bonds were auctioned. But the bonds were not actively traded that day as the speculators sold the 12.59-per cent bonds to take fresh positions in the new bonds.

The 11.19 per cent bonds, however, began to trade cautiously and did not show any marked appreciation from the first day's prices. As of Saturday, the last day of the week under review, the 11.19-per cent bonds traded at a high of Rs 100.47.

At the fortnightly 364-day T-bill auction, the Reserve Bank of India lowered the cut-off yield to 8.35 per cent from the previous auction's 8.45 per cent yield.

The RBI garnered Rs 1,023.41 crore of which Rs 80 crore devolved on the primary market dealers. At the weekly 91-day T-bill auction, the RBI lowered the cut-off yield by 9 basis points at 6.6 per cent. The entire Rs 300 crore notified by the RBI was subscribed.

The 14-day T-bill rate, however remained unchanged at the previous auction's cut-off rate of 4.6 per cent. The RBI received in all 3,125 crore worth of bids and all the bids were accepted.

The interbank call rate is seen hovering around 6-8 per cent during the first half of the new week beginning today. Most dealers expect the rate to ease later and settle around 4-6 per cent levels.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.