Financial Daily from THE HINDU group of publications
Tuesday, Sep 23, 2003
Financial Daily from THE HINDU group of publications Tuesday, Sep 23, 2003 |
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Money & Banking
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Debt Market RIB redemptions may not impact liquidity Rukmani Vishwanath
Mumbai , Sept. 22 ALTHOUGH anxiety over the impending Resurgent India Bond redemptions have been bogging down bond prices by around 15-30 paise across maturities over the past week, bankers now feel that redemptions are unlikely to have any long-term impact on market liquidity. "Dollar inflows are still coming in. The rupee has recovered back to 45.75 today and there is still ample liquidity in the bond market. The redemptions are not expected to be a major problem'', said Mr Shah Rukh Wadia, Head-Treasury, IndusInd Bank. Debt market analysts too concur with this view, and believe that a 10-15 paise weakening in bond prices is not indicative of any "liquidity crisis". "There have been times when bond prices have fallen by Rs 1-Rs 2. This10-15 paise movement is being caused by some jitters in the market and are nothing to be concerned about, especially when the RBI has repeatedly reiterated that the redemptions will be smooth and any problem arising in liquidity will be met'', said an analyst. Meanwhile, in the 14 day repo auction held on Monday, under RBI's liquidity adjustment facility, bids amounting to Rs 1,195 crore were received, which is a drastic fall from the previous fortnightly repo, which clocked an amount of Rs 16,870 crore. At the same time, the amount received in the one-day repo has shot up to around Rs 20,000 crore from Rs 9,040 crore previously. According to some debt market analysts, this could be due to a transfer of funds by State Bank of India, which has shifted this huge amount from the 14-day repo to the one day in preparation to meet the redemption requirements. Analysts contend that post-redemptions, the Government's borrowing programme will be scheduled for the longer end of the yield curve, in keeping with RBI's efforts to steepen it. As on September 19, of the Government's gross borrowings of Rs 1,65,887 crore for this financial year, around 56 per cent has been completed and the remaining will be completed by February 2004.
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