Re falls, yields at two-week high
The foreign exchange and bond markets witnessed volatile movements on Monday, propped by global concerns and dwindling cash conditions in local markets.
By TNN |
MUMBAI: The foreign exchange and bond markets witnessed volatile movements on Monday, propped by global concerns and dwindling cash conditions in local markets.
While the rupee ended the day at 39.77 levels versus the dollar, bond yields rose to a two-week high. Rates in the inter-bank call money market rose to 8%. The rupee, which had closed at 39.67 on Friday, fell against the dollar as sentiment was hit by risk aversion felt in Asian markets which increased the probability of capital outflows.
In the domestic market, there was considerable demand for dollars from oil companies, while foreign fund inflows remained stunted. In the government bond market, demand for bonds was largely affected as most traders were wary of a severe crunch in cash conditions going forward. The central bank has not been intervening in the forex market as the rupee has been on a weakening mode, given that there are no significance dollar inflows.
The yield on the benchmark paper, the 7.99% bond maturing in 2017, ended at 7.54%, above Friday���s close of 7.51%. It rose to as high as 7.57% levels during the day. The market is taking cognisance of the liquidity drying up, and where the rates are headed towards, depends on what kind of cash conditions we see in the market,��� said a bond dealer. Another factor is that companies will be making advance tax payouts in March, which will further take a toll on liquidity.
Meanwhile, the Reserve Bank of India infused funds worth Rs 4,000 crore through its window for liquidity adjustment via repo operations.
It may be noted that just a few days ago, banks were actually parking surplus funds worth more than Rs 10,000 crore with the central bank under the reverse repo operations. Rates on the interbank call-market ended at the day���s high of 8.10% after transactions worth Rs 14,747 crore were carried out. The rates had started the day at 7.30%.
Collateralised borrowing rates ended the day at 7.70% after Rs 39,943 crore was transacted. The rates had opened at 6.90% and touched a high of 7.87%. Repo rates ended the day at 9.50% after transactions worth Rs 23,899 crore were carried out.
While the rupee ended the day at 39.77 levels versus the dollar, bond yields rose to a two-week high. Rates in the inter-bank call money market rose to 8%. The rupee, which had closed at 39.67 on Friday, fell against the dollar as sentiment was hit by risk aversion felt in Asian markets which increased the probability of capital outflows.
In the domestic market, there was considerable demand for dollars from oil companies, while foreign fund inflows remained stunted. In the government bond market, demand for bonds was largely affected as most traders were wary of a severe crunch in cash conditions going forward. The central bank has not been intervening in the forex market as the rupee has been on a weakening mode, given that there are no significance dollar inflows.
The yield on the benchmark paper, the 7.99% bond maturing in 2017, ended at 7.54%, above Friday���s close of 7.51%. It rose to as high as 7.57% levels during the day. The market is taking cognisance of the liquidity drying up, and where the rates are headed towards, depends on what kind of cash conditions we see in the market,��� said a bond dealer. Another factor is that companies will be making advance tax payouts in March, which will further take a toll on liquidity.
Meanwhile, the Reserve Bank of India infused funds worth Rs 4,000 crore through its window for liquidity adjustment via repo operations.
It may be noted that just a few days ago, banks were actually parking surplus funds worth more than Rs 10,000 crore with the central bank under the reverse repo operations. Rates on the interbank call-market ended at the day���s high of 8.10% after transactions worth Rs 14,747 crore were carried out. The rates had started the day at 7.30%.
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Collateralised borrowing rates ended the day at 7.70% after Rs 39,943 crore was transacted. The rates had opened at 6.90% and touched a high of 7.87%. Repo rates ended the day at 9.50% after transactions worth Rs 23,899 crore were carried out.
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