Excess liquidity keeps call rate at record low
Saturday, 11 April 2009
Sarwar Zahan
The interbank call money rate stayed at its record low last week due to the reluctance of the central bank of Bangladesh to withdraw cash from the market, fund managers said.
The call rate fluctuated mainly in its extreme range of 0.25 per cent and 10.0 per cent repeating the same range of the previous week.
Most of the deals were, however, made at rates varying between 0.50 per cent and 2.00 per cent in against the previous week's range of 0.50 per cent to 3.00 per cent. This reflected existence of excess liquidity in the market.
The central bank also bought US dollars from the market that injected fresh cash into the market.
The central bank refrained from accepting the reverse repurchase agreement (repo) fund amounting to around Tk 10.0 billion that could have created some pressure on liquidity. It caused excess liquidity in the market, fund managers said.
It also refrained from withdrawing around Tk 14.75 billion through reverse repo auctions to ensure comfortable liquidity in the market.
The central bank withdrew Tk 1.50 billion through auctions of Fifteen-year Bangladesh Government Treasury Bonds at an interest rate of 12.0 per cent per annum.
In addition, the government borrowed Tk 5.0 billion Sunday through auctions of treasury bills. It resulted in withdrawal of Tk 5.0 billion from the market in the week.
Bidders offered bids for Tk 16.7325 billion and Tk 6.0725 billion against 91-day and 182-day bills respectively.
The central bank, however, accepted Tk 2.50 billion and Tk 2.50 billion against 91-day and 182-day bills respectively.
The rates of the implicit yield against the accepted bills were 7.00-7.30 per cent and 7.90-8.09 per cent per annum respectively.
The net outflow of cash from the market was expected to put some pressure on liquidity, but the market remained highly liquid, the fund managers said.
Most deals were made at rates below the bank rate of 5.00 per cent that indicated extremely lower pressure on liquidity.
The call rate, however, rose above the main level in stray deals with borrowing of cash by some banks and financial institutions at high rates from the interbank market to meet urgent needs of their clients, fund managers said.
The dealer banks borrowed cash mainly at rates varying between 0.50 per cent and 1.50 per cent among them in the interbank market against the previous week's range between 2.0 per cent and 3.0 per cent.
The market is likely to maintain comfortable liquidity in coming sessions with the central bank adhering to its non-intervention policy, according to fund managers.
The interbank call money rate stayed at its record low last week due to the reluctance of the central bank of Bangladesh to withdraw cash from the market, fund managers said.
The call rate fluctuated mainly in its extreme range of 0.25 per cent and 10.0 per cent repeating the same range of the previous week.
Most of the deals were, however, made at rates varying between 0.50 per cent and 2.00 per cent in against the previous week's range of 0.50 per cent to 3.00 per cent. This reflected existence of excess liquidity in the market.
The central bank also bought US dollars from the market that injected fresh cash into the market.
The central bank refrained from accepting the reverse repurchase agreement (repo) fund amounting to around Tk 10.0 billion that could have created some pressure on liquidity. It caused excess liquidity in the market, fund managers said.
It also refrained from withdrawing around Tk 14.75 billion through reverse repo auctions to ensure comfortable liquidity in the market.
The central bank withdrew Tk 1.50 billion through auctions of Fifteen-year Bangladesh Government Treasury Bonds at an interest rate of 12.0 per cent per annum.
In addition, the government borrowed Tk 5.0 billion Sunday through auctions of treasury bills. It resulted in withdrawal of Tk 5.0 billion from the market in the week.
Bidders offered bids for Tk 16.7325 billion and Tk 6.0725 billion against 91-day and 182-day bills respectively.
The central bank, however, accepted Tk 2.50 billion and Tk 2.50 billion against 91-day and 182-day bills respectively.
The rates of the implicit yield against the accepted bills were 7.00-7.30 per cent and 7.90-8.09 per cent per annum respectively.
The net outflow of cash from the market was expected to put some pressure on liquidity, but the market remained highly liquid, the fund managers said.
Most deals were made at rates below the bank rate of 5.00 per cent that indicated extremely lower pressure on liquidity.
The call rate, however, rose above the main level in stray deals with borrowing of cash by some banks and financial institutions at high rates from the interbank market to meet urgent needs of their clients, fund managers said.
The dealer banks borrowed cash mainly at rates varying between 0.50 per cent and 1.50 per cent among them in the interbank market against the previous week's range between 2.0 per cent and 3.0 per cent.
The market is likely to maintain comfortable liquidity in coming sessions with the central bank adhering to its non-intervention policy, according to fund managers.