The easing of global crude prices from their record highs provided some relief for both the forex and bond markets on Wednesday. Meanwhile, call rates shot up to an intra-day high of 8.25% following tight liquidity.
Although RBI refinance is available at 7.75% under the repo window, not all banks have access to this facility as funds are provided only against the government securities. Several banks do not have excess government securities to borrow under repo.
The rupee rose on Wednesday, as a slight dip in crude-prices calmed dollar-demand from oil companies. The rupee ended the day at 42.74/75-levels against the dollar, rising from its previous close of 42.96/97. Lesser demand from oil companies surely helped the rupee gain ground against the dollar, said a trader with a private bank.
Also, some foreign banks sold off dollars towards the end of trade, in an attempt to arbitrage the rate differential in the offshore NDF market. Selling dollars in the spot market and then buying them in the offshore non-deliverable forwards market, when it is quoting at a higher price there, is a practice adopted often by foreign banks. Market participants also confirmed that the central bank did not sell dollars on Wednesday.
Sentiment on the bond market was also buoyed by the dip in crude prices, and yields on the ten-year benchmark bond, the 8.24% bond maturing in 2018, ended the day at 8.06%. The yield had ended the day at 8.11% on Tuesday. According to a senior official at a bond house, There are positive signals on the liquidity front, with reports of a rise in government spending.
A total of Rs 215 crore was borrowed by two banks from the central bank through repo operations of its liquidity adjustment system, the day after the countrys largest bank borrowed a record Rs 13,000 crore. Two banks also parked Rs 185 crore with the central bank though reverse repo operations of the LAF. RBI also auctioned Rs 1,000 crore of treasury bills of two separate tenors on Wednesday. A yield of 7.47% was declared on the 91-day T-bill while a yield of 7.53% was declared on the 182-day T-bill.
Overnight call rates shot up as liquidity came under a strain. Rates on the inter-bank call market ended the day at 7.6% after transactions worth Rs 17,080 crore were carried out. Collateralised borrowing rates ended the day at 7.72% after transactions worth Rs 39,776 crore were made. Rates risen to a high of 8.1% during the day. Repo rates on the other hand, ended the day at 7.7% after transactions worth Rs 16,369 crore were made.