CALL MONEY
Call money rates ended steady on Wednesday around seven per cent amid sustained demand for funds to cover outflows towards the bond auction on Wednesday. The overnight interest rates opened at 6.9-7%, unchanged from the previous close. "There was continuous demand for funds throughout the day to cover outflows towards the auction," a primary dealer said. Call money rates ended at 6.9-7 per cent. RBI conducted the auction of the 12.25 per cent 2010 bond for Rs 6,000 crore on Wednesday. Payment by successful bidders will be on Thursday. Dealers said liquidity was comfortable despite the outflows and was reflected at the repo auction. The five per cent fixed rate three-day repo attracted one bid for Rs 3,750 crore. "There won't be tightening in liquidity even after outflows as there is the cushion of refinance available to most banks and primary dealers," a dealer in a private sector bank said.
FORECAST: Call money rates seen steady on Thursday.SPOT DOLLAR
The rupee ended slightly weaker on Wednesday against the dollar in range-bound trading. The rupee opened at 43.64/65 as against Tuesday's close of 43.6375/6425. "Trading remained range-bound. In the morning, inter-bank demand tried to bring the rupee down, going short dollars. Towards afternoon, as some state-run banks showed interest in buying dollars, the shorts got covered," a foreign bank dealer said. Dealers reported some dollar demand from custodial banks of foreign funds. A large petrochemicals firm was also believed to be buying dollars, they said. The rupee ended at 43.6475/6525, after trading in a two paise range between 43.635 and 43.655. Cash/spot ended at 0.25/0.375 paise, cash/tom at 0.00/0.25 paise and tom/spot at 0.00/0.25 paise. The RBI fixed its reference rate for the US dollar at 43.65 as against the previous close of 43.66.
FORECAST: The rupee seen steady on Thursday.
FORWARD PREMIUMS
Forward premiums ended mostly flat in ranged trade amid mild paying interest. "Premiums should have ideally come down. Most dealers were expecting a devolvement at the bond auction, which means the outflows from the system were thought to be less," a foreign bank dealer said. "Besides, the fact that money went into central bank repos also indicates there is enough liquidity in the system." The RBI on Wednesday auctioned 12.25 per cent 2010 bond worth Rs 6,000 crore. The central bank received and accepted one bid worth Rs 3,750 crore at its five per cent repo auction. The six-month premium ended at an annualised 2.69 per cent against 2.66 per cent on Tuesday. May dollars ended at 6/7 paise, June at 14/15 paise, while in the far end November closed at 67/68 paise and December at 80/81 paise. "There was moderate activity in the three and six month maturities, otherwise trading in forward segment was dull," a dealer said.
FORECAST: Premiums seen range bound on Thursday.
GILTS
Bond prices ended lower, amid expectation of tighter liquidity among players. "Traders are fearing the 12.25 per cent 2010 issue will devolve at yields below the market levels. In that case, prices will move downwards after the auction results are announced to align with market levels," a primary dealer said. The 11.83 per cent 2014 bond ended at Rs 108 compared to Rs 108.25/30 on Tuesday evening. The 12.29 per cent 2010 bond closed at Rs 111.10/15 compared to the previous Rs 111.27/35. Dealers said traders were unwilling to take a view on long term rates and the 10-year paper was likely to devolve unless the central bank set a yield of around 10.50 per cent. 1Dealers said traders were concerned that long-term interest rates had bottomed and rising inflation rate further bolstered the view.
FORECAST: Bond prices seen lower on Thursday.
-- Compiled by Anurag Joshi
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