Call rates at 7 %, Rupee ends at 44.43/$

Mumbai, March 22 | Updated: Mar 23 2006, 05:30am hrs
Indian federal bonds slipped on Wednesday, as most investors preferred to stay on the sidelines ahead of the government's first half borrowing plan, which is expected in the next few days, dealers said.

Government and central bank officials will meet on Friday to discuss the schedule of borrowings for the first half of the financial year beginning April 1, 2006, a finance ministry official said on Wednesday.

The government expects to raise a gross 1.53 trillion rupees ($34.3 billion) from the debt market in the coming financial year, up 10 percent from this year, and traders expect it to raise at least half the amount in the April-September period.

"But what is crucial is how much the government will raise in April," said a trader at a foreign bank. "There are redemptions worth Rs 150 billion lined up and they are likely to raise an equivalent amount if not more."

The yield on the active 8.07 percent 2017 bond inched up to 7.39 percent, from Tuesday's close of 7.38 percent. It touched a three-week low of 7.37 percent on Tuesday.

"They are lending relatively small amounts," said a chief trader at a large foreign bank. "Liquidity is still tight in the banking system and unless they start lending in a bigger way, we do not expect overnight rates to ease fast."

Overnight inter-bank funding costs ended at 7.0-7.25 percent unchanged from the previous close.

Meanwhile the RBI in its first LAF infused Rs 20,635 crore through its repo auction window and absorbed Rs 100 crore by way of reverse repo mechanism. While in the second LAF RBI has injected Rs 4,220 crore, at a rate of 6.5% and mopped Rs 15 crore at rate of 5.5%.

The Indian rupee ended at its lowest level in more than a week on Wednesday after continuous dollar buying by state-run banks, which traders suspected was on behalf of the central bank. The Indian rupee closed at 44.5150/5200 per dollar, 0.2 percent down from Tuesday's close of 44.4350/4450 Dollar gains overseas also undermined the rupee, with the U.S. currency gaining against the euro and yen in anticipation that U.S. interest rates will rise even after an expected rate increase when the Federal Reserve meets next week.