(Updates to close)
By Anurag Joshi
MUMBAI, Nov 22 (Reuters) - Indian federal bond yields eased
on Thursday as banks' cash holdings rose, which traders said
helped investors build fresh positions and pushed overnight cash
rates below 5 percent during the day.
The 10-year federal bond <IN079917G=CC> ended at 7.88
percent, a notch below Wednesday's close of 7.89 percent.
"Cash has improved as the central bank has infused enough
liquidity to perk sentiment," a trader with a foreign bank said.
The overnight cash rate <INROND=> ended at 5.0-5.25 percent,
off an intraday low of 4.75 percent but down from the previous
close of 5.75-6.0 percent. It rose to near 10 percent earlier
this month as cash conditions tightened.
An increase in reserve requirements for banks that took
effect on Nov. 10 drained 160 billion rupees ($4.1 billion) from
the system, tightening the availability of cash.
To alleviate the squeeze on funds, the central bank has been
injecting cash through its daily repo action.
On Thursday however, banks did not need to borrow funds and
instead placed 40.55 billion rupees with the Reserve Bank of
India via its reverse repo window.
"Banks were over-covered as they had borrowed huge amount of
money from the central bank on Wednesday to keep up with reserve
requirements," the trader said.
"There is some surplus money which they are now placing with
the central bank. By Monday, we could see some tightness again,"
he added.
Inflation data on Friday could provide cues for the market.
A Reuters poll on Thursday showed the annual wholesale price
inflation rate at at Nov. 10 is forecast at 3.16 percent, up from
3.11 percent a week earlier and the second straight rise since it
fell to its lowest in more than five years.
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MARKET SNAPSHOT
Bombay Sensitive Index <.BSESN>
Indian rupee (/$) <INR=IN>
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($1 = 39.5 rupees)
(Editing by John Mair)
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Keywords: MARKETS INDIA MONEY