Call ends at 6.9%

In the government bond market, prices eased off from Friday’s closing levels. The yield on the benchmark 7.59% 2016 paper rose to 7.62%, from the previous closing of 7.61%, with traders expressing concern on fresh supplies, amidst tightening liquidity conditions.

Call rates closed at 6.80-6.90%, after having touched an intra-day high of 7%. Surplus liquidity in the system came under severe pressure as the Reserve Bank of India was able to mop up barely Rs 2,000 crore through reverse repo operations under liquidity adjustment sessions. There were, however, no operations under the repo window. After the market closing hours on Friday, the Centre

had announced a borrowing programme to raise Rs 9,000 crore on November 3.In its mid-term review on macroeconomic and monetary developments, RBI noted that although yields on 91-day treasury bills rose in the quarter under review, yields on the 364-day T-bills exhibited modest. As a result, the yield spread between 364-day and 91-day T-bills, which had widened to 63 basis points in June ‘06, narrowed to 29 basis points in October ‘06.

The central bank stated that interest rates in the collateralised segments of the money market — the market repo (outside the LAF) and the collateralised borrowing and lending obligation (CBLO) segments — continued to hover below the call rate between July-August ‘06. The collateralised market is now the predominant segment in the money market, with a share of more than 70% during ‘06-07, so far, noted the central bank.