Call money firms up to end at 5.00-5.25 per cent

Mumbai, Mar 6 (UNI) The inter-bank Call money today closed 5-10 basis points higher at 5.00-5.25 per cent, amid concerns among traders that the Central Bank might initiate action to absorb surplus cash.

Intra-day, the rates fluctuated between a low of 5.05 per cent and a high of 5.40 per cent.

The Central Bank had yesterday announced that it may absorb a maximum of Rs 3,000 crore per day at its reverse repurchase auction window, the lowest-yielding money market instrument.

However, this latest modification is intended to ensure that surplus liquidity is drained out via market stabilization Scheme (MSS) bills and bonds. This is expected to open the door for further Central Bank intervention in the forex market, market analysts said.

The RBI has auctioned Rs 6,000 crore MSS bonds today, with settlement due tomorrow. Further, the Central Bank will auction bonds worth Rs 7,000 crore on March 9, which is Rs 1000 crore less than initially planned.

India's foreign exchange reserves have risen since early Jan by about USD 16 billion to a record USD 193.14 billion on Feb 23, which is seen as evidence of suspected Central Bank intervention in the currency market to cap the rupee, experts observed.

Meanwhile, Indian federal bond yields ended slightly higher today as traders remained wary of more Central Bank action to absorb the surplus cash.

The yield on the 10-year bond ended at 7.95 per cent, above the previous close of 7.94 per cent.

Investors took an auction of Rs 6,000 crore of bonds under market stabilisation scheme (MSS) today in their stride as liquidity remained comfortable.

It was the first bond issue under MSS after a gap of more than 18 months, although the Central Bank issues treasury bills at weekly auctions.

The Central Bank also said it would notify every Friday whether more MSS bonds were to be issued and their subsequent value.

These MSS bonds are intended to drain excess rupee liquidity,which has been pumped into the system due to intervention in the currency market, analysts explained.

UNI