Call rates may remain higher, Re outlook seen weak
Call rates remained above 8% barring a brief dip to 4-4.25% on the reporting Friday, as banks seemed to have covered fortnightly positions, ahead of bond auction.
By ET Bureau |
Call rates remained above 8% barring a brief dip to 4-4.25% on the reporting Friday, as banks seemed to have covered fortnightly positions, ahead of bond auction. At the LAF, the Reserve Bank of India (RBI) pumped in an average of Rs 6,696 crore through the repo window, reflecting tight cash in the system. Call rates are expected to remain higher. Pressure on funds could ease once advance tax outflows start making their way back into the banking system and usual government spending at the start of next month could shore up cash.
Gilts Market
The 10-year yield soared to its highest in nearly seven years after inflation touched its 13-year high on Friday, aggravating concerns over policy-tightening measures by the central bank in an attempt to contain inflation.
Annual inflation rose 11.05%, sharply above market expectations of 9.82% weighing on the sentiment and traders cut positions resulting into low volumes in apprehensions of liquidity squeeze. However, inflationary expectations stay elevated and so do fears of monetary tightening while rupee liquidity is likely to remain under pressure, which will keep bonds weak.
Corporate Bonds
Commercial paper
In the short-term non-SLR segment, the 3-month P1+ CP rate found a ceiling at 9%.At the treasury bill auctions, the 91-day bill cut-off price was cut further lower to Rs 98.03 (yield 8.0604%) from Rs 98.12 (7.6851%) while the 364-day price fell to Rs 92.40 (8.2477%) from Rs 92.95 (7.6055%).
The rupee traded in a very narrow range, but precariously close to the psychological 43/$-mark. Negative inflows and weak financial market sentiment kept up the pressure on the rupee. Non-deliverable forward quotes rose, offering scope for arbitrage, but traders said that it was the dollar supply from state-owned banks that offered
supported the rupee. Rupee outlook remains weak for the medium term, and if the support at 43/$ breaks, the rupee faces risk of a swift dip. Investment flows hold the key for the rupee and the mood of international investors would be watched with interest.
Gilts Market
The 10-year yield soared to its highest in nearly seven years after inflation touched its 13-year high on Friday, aggravating concerns over policy-tightening measures by the central bank in an attempt to contain inflation.
Annual inflation rose 11.05%, sharply above market expectations of 9.82% weighing on the sentiment and traders cut positions resulting into low volumes in apprehensions of liquidity squeeze. However, inflationary expectations stay elevated and so do fears of monetary tightening while rupee liquidity is likely to remain under pressure, which will keep bonds weak.
Corporate Bonds
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Similar to the risk-free segment, corporate bond yield curve rose with big gaps, as inflationary pressure and speculation over monetary policy increased by the day. In the short-term non-SLR segment, the 3-month P1+ CP rate found a ceiling at 9%. Non-SLR market activities will not improve amidst absence of surplus cash in the money market.Commercial paper
In the short-term non-SLR segment, the 3-month P1+ CP rate found a ceiling at 9%.At the treasury bill auctions, the 91-day bill cut-off price was cut further lower to Rs 98.03 (yield 8.0604%) from Rs 98.12 (7.6851%) while the 364-day price fell to Rs 92.40 (8.2477%) from Rs 92.95 (7.6055%).
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ForexThe rupee traded in a very narrow range, but precariously close to the psychological 43/$-mark. Negative inflows and weak financial market sentiment kept up the pressure on the rupee. Non-deliverable forward quotes rose, offering scope for arbitrage, but traders said that it was the dollar supply from state-owned banks that offered
supported the rupee. Rupee outlook remains weak for the medium term, and if the support at 43/$ breaks, the rupee faces risk of a swift dip. Investment flows hold the key for the rupee and the mood of international investors would be watched with interest.
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