Smooth Run

The Central Bank
quote s new money market auction started off on Monday, with the bank offering and accepted bids for Rs. 6 bn at 9.26 percent.
Earlier, dealers had put in bids worth Rs. 13.4 bn.rn

rnThe market is flushed with Rs. 13.6 bn in excess liquidity, and dealers were expecting the bank to auction the surplus funds at around 9.3 percent.rn

rnHowever, the bank left its key discount rates (also known as its interest rate corridor) unchanged at 9 percent for the repurchase rate (repo) and 11 percent for the reverse repurchase rate (reverse repo).rn

rnUnder the active open market operations, in the event of a shortfall, the Central Bank will inject liquidity through a reverse repurchase auction. The bank will mop up excess liquidity through the repurchase auction. rn

rnThe Central Bank will continue to use the repo and reverse repo to signal its interest rate policies.rn

rnUnder the new auction, daily rates would be kept somewhere in the middle. rnrn