Interest Rate Arbitrage

13/03/2011 06:43

 Now time to play with interest rate. Opportunities lies here and there and comes time and again. Look for rate arbitrage opportunity in debt instruments like banks.  Banks are borrowing from RBI to lend in the money market, taking advantage of a rate arbitrage opportunity. Funds are available at 6.5% from the central bank under its liquidity adjustment facility (LAF) while rates in the call money market, where banks borrow from each other, are at 6.75-6.85%.