On Monday night the Reserve Bank announced it will pump in Rs 8,000 crore of cash into the markets this week through open market operations.
The announcement came after government bond prices fell in the day as worries about Rs 53,000 crore worth of debt and treasury bill sales this week kept investors cautious after last weeks volatile trading.
The fall was a response to the large supply of the paper in the market as Reserve Bank of Indias cash tightening steps have kept the overnight rate firmly lodged above the emergency funding rate of 10.25 per cent,highlighting how expensive it has become to access short-term rates.
The Reserve Bank of India will sell another Rs 18,000 crore of bonds on Friday,its biggest weekly sale during the fiscal first half ending in September. In addition,the central bank will sell Rs 22,000 crore of cash management bills and Rs 12,000 crore of treasury bills. The simultaneous open market operations will ease the tightening of liquidity that would occur from these sales.
The benchmark 10-year bond yield rose 8 basis points to 8.34 per cent. The yield fell 62 bps last week,its biggest fall in four-and-a-half years after surging to 9.48 per cent on Tuesday. The bond market also continues to remain hostage to the rupees fortunes.
Dealers said the choice of 48-day paper for cash management bills this week also dented sentiment as the maturity is longer than previous sales of such short-term debt,which will keep away liquidity for a longer time.
In the overnight indexed swap market,the benchmark five-year rate closed up 1 bp at 8.42 per cent. The one-year rate ended higher 5 bps at 9.50 per cent.
Rupee back in free-fall mode,RBI prevents breach of 65-mark to dollar
Mumbai: After Fridays big recovery,the Indian rupee on Monday plunged again to end at 64.30,a fall of 110 paise or 1.74 per cent,with month-end dollar demand from importers pulling the currency lower.
As the rupee fell to 64.75 in intra-day trading,the Reserve Bank of India intervened through dollar sales via PSU banks and prevented another slide below the 65 mark. Mondays fall tracked the one-month offshore non-deliverable forward (NDF) rate,which was being quoted at 65.02 per dollar,compared to the onshore one-month forward rate of 64.88