Business momentum pushes up call rate
Saturday, 13 September 2008
Sarwar Zahan
The inter-bank call money rate gained ground last week due to rise in overall pressure on liquidity, fund managers said.
The market experienced strong demand for cash with momentum in business activities ahead of Eid festival. The pressure on liquidity was, however, confined to a reasonable level because of injection of fresh cash into the market by the central bank, they said.
The call rate in extreme range fluctuated mainly between 6.50 per cent and 12.50 per cent against the previous week's range between 4.00 per cent and 12.00 per cent.
The rate, however, fluctuated mainly between 7.50 per cent and 9.50 per cent in most deals against the previous week's range between 7.00 per cent and 9.00 per cent that indicated an increased pressure on liquidity.
The central bank kept cautious eyes on the movements of the market and used its tools for ensuring stability in the market. It injected fresh cash into the market to balance the withdrawal of fund through treasury bills and bonds, fund managers said.
The central bank injected fresh cash of about Tk 20 billion into the market through repurchase agreement (repo) auctions at an interest rate of 8.50 per cent per annum to ease the pressure on liquidity against the previous week's Tk 28.691 billion.
It, however, withdrew Tk 1.50 billion against 15-year Bangladesh government treasury bonds at an interest rate of 12.14 per cent per annum.
The government borrowed also Tk 5.00 billion Sunday through auctions of treasury bills. This resulted in withdrawal of Tk 5.00 billion from the market in the week.
Bidders offered Tk 6.835 billion and Tk 3.178 billion against 91-day and 364-day bills respectively.
The central bank, however, accepted Tk 2.50 billion and Tk 678 million against 91-day and 364-day bills respectively.
Besides, Tk 1.822 billion were devolved to primary dealers for 364-day bills.
The ranges of the implicit yields against the accepted bills respectively were 7.77 per cent and 8.51 per cent per annum.
The net outflow of cash from the market increased pressure on liquidity, the fund managers said.
The mismatch between inflow and outflow of cash, however, helped improve the liquidity position and prevent the call rate from rising, they said.
The lower edge of the call rate remained above the bank rate of 5.00 per cent in all sessions last week indicating an overall high pressure on liquidity.
Some banks and financial institutions borrowed cash at high rates from the inter-bank market to meet urgent needs of their clients. This influenced the call rate to rise above the main trend in stray deals, fund managers said.
The dealer banks borrowed cash mainly at rates varying between 7.00 per cent and 9.50 per cent among them in the inter-bank market against the previous week's range between 6.25 per cent and 9.00 per cent.
The central bank mobilised its efforts for maintaining market stability apprehending market volatility during the month of holy Ramadan. It provided liquidity support by injecting cash into the market showing a better management, fund managers said.
Many banks met demand for cash from own sources that indirectly protected the inter-bank market from excessive pressure. This influenced the call rate to move on a reasonable level, they said.
Bankers continue to expect an increase in demand for cash due to business momentum in the holy month of Ramadan and they hope the central bank would play an effective role in keeping market behaviour favourable, market sources said.
The inter-bank call money rate gained ground last week due to rise in overall pressure on liquidity, fund managers said.
The market experienced strong demand for cash with momentum in business activities ahead of Eid festival. The pressure on liquidity was, however, confined to a reasonable level because of injection of fresh cash into the market by the central bank, they said.
The call rate in extreme range fluctuated mainly between 6.50 per cent and 12.50 per cent against the previous week's range between 4.00 per cent and 12.00 per cent.
The rate, however, fluctuated mainly between 7.50 per cent and 9.50 per cent in most deals against the previous week's range between 7.00 per cent and 9.00 per cent that indicated an increased pressure on liquidity.
The central bank kept cautious eyes on the movements of the market and used its tools for ensuring stability in the market. It injected fresh cash into the market to balance the withdrawal of fund through treasury bills and bonds, fund managers said.
The central bank injected fresh cash of about Tk 20 billion into the market through repurchase agreement (repo) auctions at an interest rate of 8.50 per cent per annum to ease the pressure on liquidity against the previous week's Tk 28.691 billion.
It, however, withdrew Tk 1.50 billion against 15-year Bangladesh government treasury bonds at an interest rate of 12.14 per cent per annum.
The government borrowed also Tk 5.00 billion Sunday through auctions of treasury bills. This resulted in withdrawal of Tk 5.00 billion from the market in the week.
Bidders offered Tk 6.835 billion and Tk 3.178 billion against 91-day and 364-day bills respectively.
The central bank, however, accepted Tk 2.50 billion and Tk 678 million against 91-day and 364-day bills respectively.
Besides, Tk 1.822 billion were devolved to primary dealers for 364-day bills.
The ranges of the implicit yields against the accepted bills respectively were 7.77 per cent and 8.51 per cent per annum.
The net outflow of cash from the market increased pressure on liquidity, the fund managers said.
The mismatch between inflow and outflow of cash, however, helped improve the liquidity position and prevent the call rate from rising, they said.
The lower edge of the call rate remained above the bank rate of 5.00 per cent in all sessions last week indicating an overall high pressure on liquidity.
Some banks and financial institutions borrowed cash at high rates from the inter-bank market to meet urgent needs of their clients. This influenced the call rate to rise above the main trend in stray deals, fund managers said.
The dealer banks borrowed cash mainly at rates varying between 7.00 per cent and 9.50 per cent among them in the inter-bank market against the previous week's range between 6.25 per cent and 9.00 per cent.
The central bank mobilised its efforts for maintaining market stability apprehending market volatility during the month of holy Ramadan. It provided liquidity support by injecting cash into the market showing a better management, fund managers said.
Many banks met demand for cash from own sources that indirectly protected the inter-bank market from excessive pressure. This influenced the call rate to move on a reasonable level, they said.
Bankers continue to expect an increase in demand for cash due to business momentum in the holy month of Ramadan and they hope the central bank would play an effective role in keeping market behaviour favourable, market sources said.