"Easy liquidity conditions were reflected in the softening of interest rates on securities across the maturity spectrum for the second consecutive year in 1997-98," the RBI states.

The yield spread between the 91-day and the 364-day treasury bills declined by 149 basis points to 65 basis points in 1997-98 while the spread between the 91-day paper and the 10-year paper declined by 87 basis points to 482 basis points.

The maximum coupon rate on a 10-year paper declined from 13.65 per cent in February 1997 to 13.05 per cent in April 1997. The coupon rate for a private placement with the Reserve Bank of a 10-year security was fixed substantially lower at 12.15 per cent, reflecting a secondary market yield on securities of similar maturity in March 1998.

The cut-off yield of a five-year securitydeclined from 13.55 per cent in November 1996 to 11.15 per cent in September 1997. The cut-off yield on a periodic auctions of treasury bills in general reflected varying liquidity conditions. The cut-off yield of the 364-day treasury bills was reduced from 10.10 per cent in end-March 1997 to a historical low of 7.98 per cent between end-October 1997 and March 1998.

After following a declining trend from 7.96 per cent in March 1997 to 6.22 per cent in November 1997, the cut-off yield on the 91-day treasury bills increased to 7.33 per cent in March 1998. The cut-off yield on the 14-day treasury bills and the interest rate on repos also depicted a rising trend during the last quarter of 1997-98.

RBI pays Rs 110cr total underwriting fee to PDs

The RBI paid a total commission/underwriting fee of Rs 110 crore to primary dealers (PDs) during 1997-98. The RBI said that the PDs achieved a turnover of Rs 31,602 crore in treasury bills and Rs 81,035 crore in dated securities, out of which transactions onan outright basis were Rs 22,257 crore and Rs 40,810 crore in respect of treasury bills and government securities respectively.