Call rate remained below RBI’s repo rate for most part of the week

The call money rate remained below the RBI's repo rate for most part of the holiday shortened week as the government’s month-end spending supported cash conditions. Earlier in the week, liquidity was tightened on increased demand for funds from banks on account of a truncated week. Also demand for funds usually remains strong at the beginning of a reporting fortnight as banks prefer to meet most of their reserve requirements in the first week itself. However the central bank's liquidity infusion via the variable rate repo window helped eased the liquidity condition. Meanwhile the call rate ended at 7.20% on January 29, 2016 vis-à-vis 7.30-7.40% on January 22, 2016.

Gilts ended steady on mixed cues

Government bond prices were range bound due to mixed cues in the shortened trading week. The 10-year benchmark - 7.72%, 2025 bond - ended at 7.78% on January 29, 2016, flat as compared with the previous week’s close, while the newly issued 10-year 7.59%, 2026 bond too ended steady at 7.64% on January 29, 2016 as compared with the previous week’s close. Weakness in the rupee and caution ahead of the US FOMC meeting outcome weighed on buying support. However sentiment remained positive on expectation of more open market bond purchase auctions by the RBI. Gilts also rose sharply in last session of the week due to recovery in the rupee, a favourable auction cut-offs at the weekly auction and positive cues from Japan.