The Reserve Bank of India on Wednesday conducted two overnight variable rate reverse repo (VRRR) auctions of Rs 50,000 crore, and Rs 25,000 crore as money market rates fell below the repo rate, said market participants.
The overnight weighted average call rate settled at 6.43 per cent on Wednesday. The repo rate currently stands at 6.50 per cent.
The RBI received Rs 20,860 crore bids against the notified amount of Rs 50,000 crore at the first auction. However, at the second auction, banks parked only Rs 1,337 crore, against a notified amount of Rs 25,000 crore at a weighted average rate of 6.49 per cent.
“They want to keep the money market rates at the repo rate. These are fine-tuning operations,” said a dealer at a state-owned bank.
Meanwhile, the cut-off yield at the weekly Treasury bills auction softened as the liquidity situation eased compared to the previous week.
The liquidity deficit in the banking system stood at Rs 1.88 trillion on Tuesday, according to the latest data by the central bank.
The Reserve Bank of India set the cut-off yield on the 91-day, 182-day, and 364-day Treasury bills at 6.96 percent, 7.17 percent, and 7.12 percent, respectively. The cut-off yield on the 91-day bill was set 5 basis points lower, whereas that on the 182-day and 364-day cut-off yield was set 2 basis points lower than last week.
However, the yield curve remains inverted with the 10-year benchmark yield trading lower at 7.07 per cent.
“The inversion will continue for some time as liquidity remains tight, and benchmark yield will remain at the current level because the market has no cue,” said a dealer at another state-owned bank.
First Published: Feb 28 2024 | 7:58 PM IST