Excess liquidity keeps call rate steady
Saturday, 6 June 2009
Sarwar Zahan
The interbank call money rate remained steady with a downward bias last week in a market of excess liquidity, fund managers said.
The call rate in its extreme range fluctuated mainly between 1.0 per cent and 10.0 per cent against the previous week's range between 1.25 per cent and 10.0 per cent.
Most deals were, however, made at rates varying between 2.0 per cent and 3.0 per cent against the previous week's range between 2.0 per cent and 4.0 per cent. This reflected evidently a lower pressure on liquidity.
The call rate hovered above the normal trend in stray deals moving between 7.0 per cent and 10.0 per cent due to borrowing of cash by some financial institutions at high rates from interbank market to meet urgent needs of their clients, fund managers said.
The central bank refrained from accepting reverse repurchase agreement (repo) that resulted in excess liquidity in the market. The slash in demand for dollar also helped enhance liquidity in the market, fund managers said.
Normally, lower call rate reduces cost of borrowing that, in turn, raises the demand for dollar, but the market witnessed a deviation from the trend and the demand for the foreign currency remained also lower, they said.
The central bank refrained from accepting reverse repurchase agreement worth Tk 16.50 billion that helped retain the market liquidity. The government, however, borrowed Tk 2.50 billion Sunday through auction of treasury bills. It resulted in withdrawal of Tk 2.50 billion from the market in the week.
The central bank conducted auction of 91-day treasury bills. Bidders offered bids for Tk 5.883 billion against the 91-day bills.
The central bank, however, accepted Tk 2.50 billion against the bills.
The rates of the implicit yield against the accepted bills varied between 3.94 per cent and 3.97 per cent per annum. The withdrawal of cash through the T-bills created an insignificant pressure on liquidity. Rather, the position of the market improved resulting in a nominal decline in call money rate, treasury managers said. Most of the deals were made in the interbank market at rates below the bank rate of 5.00 per cent indicating an overall lower pressure on liquidity.
The dealer banks borrowed cash mainly at rates varying between 1.0 per cent and 3.0 per cent from the interbank market against the previous week's range between 1.50 per cent and 4.0 per cent.
The market is expected to retain its trend of experiencing sufficient liquidity in coming sessions with excess flow of cash due to the central bank's reluctance to withdraw fund through reverse repurchase agreement, fund managers said.
The interbank call money rate remained steady with a downward bias last week in a market of excess liquidity, fund managers said.
The call rate in its extreme range fluctuated mainly between 1.0 per cent and 10.0 per cent against the previous week's range between 1.25 per cent and 10.0 per cent.
Most deals were, however, made at rates varying between 2.0 per cent and 3.0 per cent against the previous week's range between 2.0 per cent and 4.0 per cent. This reflected evidently a lower pressure on liquidity.
The call rate hovered above the normal trend in stray deals moving between 7.0 per cent and 10.0 per cent due to borrowing of cash by some financial institutions at high rates from interbank market to meet urgent needs of their clients, fund managers said.
The central bank refrained from accepting reverse repurchase agreement (repo) that resulted in excess liquidity in the market. The slash in demand for dollar also helped enhance liquidity in the market, fund managers said.
Normally, lower call rate reduces cost of borrowing that, in turn, raises the demand for dollar, but the market witnessed a deviation from the trend and the demand for the foreign currency remained also lower, they said.
The central bank refrained from accepting reverse repurchase agreement worth Tk 16.50 billion that helped retain the market liquidity. The government, however, borrowed Tk 2.50 billion Sunday through auction of treasury bills. It resulted in withdrawal of Tk 2.50 billion from the market in the week.
The central bank conducted auction of 91-day treasury bills. Bidders offered bids for Tk 5.883 billion against the 91-day bills.
The central bank, however, accepted Tk 2.50 billion against the bills.
The rates of the implicit yield against the accepted bills varied between 3.94 per cent and 3.97 per cent per annum. The withdrawal of cash through the T-bills created an insignificant pressure on liquidity. Rather, the position of the market improved resulting in a nominal decline in call money rate, treasury managers said. Most of the deals were made in the interbank market at rates below the bank rate of 5.00 per cent indicating an overall lower pressure on liquidity.
The dealer banks borrowed cash mainly at rates varying between 1.0 per cent and 3.0 per cent from the interbank market against the previous week's range between 1.50 per cent and 4.0 per cent.
The market is expected to retain its trend of experiencing sufficient liquidity in coming sessions with excess flow of cash due to the central bank's reluctance to withdraw fund through reverse repurchase agreement, fund managers said.