RBI on gilts auction spree
major drive to mop up liquidity, the Reserve Bank of India (RBI) has announced auctions of government securities worth Rs 18,000 crore next week.
By TNN |
MUMBAI: In a major drive to mop up liquidity, the Reserve Bank of India (RBI) has announced auctions of government securities worth Rs 18,000 crore next week. The auctions are seen as preparation to defend the dollar in the forex market since the central bank’s purchase of greenbacks will result in creation of rupee liquidity.
The RBI would be issuing MSS bonds worth Rs 6,000 crore through a dated security, i.e. the 6.65% bond maturing in 2009.
The central bank would also be issuing treasury bills worth Rs 3,500 crore, of which bonds worth Rs 2,500 crore would be issued through the MSS route. This apart, the RBI would be conducting an auction of central government issued dated securities worth Rs 9,000 crore on July 20.
Foreigners have bought equities worth $1.9 billion in the first eight days of July, taking their total purchases this year to $7.6 billion, almost equal to total foreign buying of $7.9 billion for the whole of last year. The inflows pushed the dollar to 40.33 on Thursday prompting the central bank to step in and buy dollars, which pulled the US currency back to 40.50 at close. On Friday, the local currency grew stronger by eight paise, closing at 40.42 levels per dollar. The movement in the rupee drew support from the huge forex inflows entering the booming equity market, but intervention from the central bank prevented the rupee from rising further.
This intervention by the RBI has added to the already flush liquidity in the banking system. The extent of surplus liquidity is reflected in the inter-bank rates, which have been below the 1%-mark. A pick-up in government spending and the central bank’s intervention in the foreign exchange market are cited as reasons for abundant cash supplies in recent days.
On Friday, too, rates in the inter-bank call market kept up with the ongoing trend as well and closed at 0.5%. A volume of Rs 13,617 crore was transacted, which opened at 0.45% and rose to an intra-day high of 0.60%. On the collateralised-borrowing window, the rates dipped to an intra-day low of 0.01% and closed at 0.04%. Transactions worth
Banks placed bids worth Rs 1,05,700 crore, but only bids worth Rs 2,999 crore were mopped up by the central bank, as per the current mandate. Bond yields rose as large short-term borrowings by
the government from the central bank and comfortable cash conditions made dealers fret about the possibility of more supplies next week.
The yield on the 10-year benchmark bond closed a tad higher at 7.93% compared to Thursday’s 7.91%.
The RBI would be issuing MSS bonds worth Rs 6,000 crore through a dated security, i.e. the 6.65% bond maturing in 2009.
The central bank would also be issuing treasury bills worth Rs 3,500 crore, of which bonds worth Rs 2,500 crore would be issued through the MSS route. This apart, the RBI would be conducting an auction of central government issued dated securities worth Rs 9,000 crore on July 20.
Foreigners have bought equities worth $1.9 billion in the first eight days of July, taking their total purchases this year to $7.6 billion, almost equal to total foreign buying of $7.9 billion for the whole of last year. The inflows pushed the dollar to 40.33 on Thursday prompting the central bank to step in and buy dollars, which pulled the US currency back to 40.50 at close. On Friday, the local currency grew stronger by eight paise, closing at 40.42 levels per dollar. The movement in the rupee drew support from the huge forex inflows entering the booming equity market, but intervention from the central bank prevented the rupee from rising further.
This intervention by the RBI has added to the already flush liquidity in the banking system. The extent of surplus liquidity is reflected in the inter-bank rates, which have been below the 1%-mark. A pick-up in government spending and the central bank’s intervention in the foreign exchange market are cited as reasons for abundant cash supplies in recent days.
On Friday, too, rates in the inter-bank call market kept up with the ongoing trend as well and closed at 0.5%. A volume of Rs 13,617 crore was transacted, which opened at 0.45% and rose to an intra-day high of 0.60%. On the collateralised-borrowing window, the rates dipped to an intra-day low of 0.01% and closed at 0.04%. Transactions worth
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Rs 27,746 crore were carried out on Friday.Banks placed bids worth Rs 1,05,700 crore, but only bids worth Rs 2,999 crore were mopped up by the central bank, as per the current mandate. Bond yields rose as large short-term borrowings by
the government from the central bank and comfortable cash conditions made dealers fret about the possibility of more supplies next week.
The yield on the 10-year benchmark bond closed a tad higher at 7.93% compared to Thursday’s 7.91%.
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