Demand for central bank money over the weekend stayed heavy. Banks bid 106,949 crore rupees for the Reserve Bank’s three-day variable rate repo on Friday, more than twice the 50,000 crore notified, and the bank allotted 50,003 crore at a cut-off rate of 5.58 percent, with a weighted average rate of 5.60 percent and partial allotment of 30.99 percent at the cut-off.
The operation, announced on Thursday on a review of liquidity conditions, runs to reversal on Monday, October 26. Its pricing is the signal: Thursday’s overnight repo cleared at 5.54 percent, Wednesday’s at 5.52 percent, and the three-day money now costs 5.58 percent at the cut-off and 5.60 percent on average. Banks are not only bidding larger amounts, they are paying a rising premium to term the funding out over the weekend rather than rolling it overnight.
That pattern, rising bids at rising rates across three consecutive operations, is what separates a calendar squeeze from a one-day settlement bulge. The dated auction the same morning cleared in full, so cash exists in the system for term government paper; the repo queue says it is not sitting with the banks that need it overnight.