The money market was stable last week as the band of interbank call money rate remained almost unchanged, and it moved above the bank rate of 5.00 per cent. The central bank regularly withdrew cash from the market conducting reverse repurchase agreement (repo) auction to maintain contractionary monetary policy and ease inflationary pressure. The call rate mainly moved between 5.15 per cent and 13.50 per cent against previous week's range between 5.25 per cent and 13.50 per cent. The rate, however, mainly fluctuated between 6.00 per cent and 7.00 per cent in most of the deals, fund managers said.
The market experienced comfortable liquidity due to flow of excess cash in the banking channel and moderate business activities.
The central bank withdrew about Tk 12.745 billion through reverse repo auction at annual interest rates varying between 5.50 per cent and 5.75 per cent against previous week's withdrawal of Tk 9.31 billion. This made a insignificant impact on market liquidity, they said.
The dealer banks transacted cash at call rates ranging between 5.15 per cent and 7.00 per cent in transactions among them. Some of the non-banking financial institutions had to borrow cash at high rates from the interbank market to meet the immediate requirements of their clients. This pushed the call rate to a level higher than expected. The nationalised commercial banks transacted cash predominantly at rates between 5.50 per cent and 7.00 per cent in the interbank market, fund management sources said.
The central bank tried to maintain the borrowing cost of local currency at high level to indirectly protect the foreign exchange market bending to achieve the aim of discouraging the foreign currency buyers from buying excess of the greenback in addition to containing the inflationary pressure, they said.
The mismatch between auction and maturity of treasury bills resulted in outflow of excess cash from the market. It created a negligible pressure on liquidity.
The government borrowed a total of Tk 6.398 billion Sunday through the auction of treasury bills. On the other hand, Tk 10.949 billion was injected into the market in the week due to maturity of some treasury bills. This resulted in a net inflow of Tk 4.551 billion in the market.
The net inflow of cash into the market was expected to decrease pressure on liquidity, the fund managers said.
Bidders offered Tk 6.348 billion and Tk 150 million against 28-day and 364-day bills respectively.
The central bank, however, accepted the bids amounting to Tk 6.248 billion and Tk 150 million against 28-day and 364-day bills respectively.
The ranges of the implicit yields were 6.85-6.91 per cent and 7.30 per cent respectively per annum.