Call money closes high at 7.25/7.35 per cent, Bonds eases

Mumbai, Dec 12 (UNI) Interbank call rates toady continued its steep climb upwards as it ended the day at 7.25-7.35 per cent, up by nearly 60 bps after having tested the eight per cent mark during intra-day trading, dealers said.

Tightening liquidity that was triggered by the Cash Reserve Ratio hike it continued to weigh heavily on sentiment. The extent of the tightening liquidity was evident by the fact that there were bids received at the repo auction as well.

Amidst the tight systemic liquidity, demand continued to be high with banks wanting to cover early on for their fortnightly requirements. As a result, there was no let up of the pressure on call rates which closed at a two month high.

At the LAF window, the RBI accepted 10 bids amounting to Rs 9,615 crore at the one-day reverse repo auction. At the repo auction, nine bids worth Rs 2,510 crore were received.

The CBLO segment saw 426 bids totalling upto to Rs 22,868 crore being traded in the range of 6.70-7.90 per cent.

Systemic liquidity is expected to come under even more pressure due to the impending advance corporate taxes. Inter bank rates are hence likely to rise even further in the coming days.

Corporate bonds witnessed yet another choppy trading session with yields across most segments rising.

Amidst tightening liquidity, news regarding the lower than anticipated industrial growth output (6.2 per cent y-o-y for the month of October) was overlooked and bond prices continued to fall.

The severity of the liquidity crunch was evident as nine bids worth Rs 2,510 crore were received at the one-day repo auction as well.

Amongst global events, the FOMC meet in the US to be held later today would be closely watched. Bond prices out there were stable as it looked certain that the key interest rates would be left untouched during the meet.

The AAA five year benchmark yield closed flat at 8.60 pr cent while its spread over comparable gilt narrowed by five bps to 97 bps.

With the cash surpluses set to dwindle even more owing to the impending advance corporate tax outflows and a few IPO issues, bonds are expected to trade dull in the week ahead, dealers added.

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