	call money pressure from large german banks one or two large west german banks effectively drained the domestic money market of liquidity at the end of the month in order to achieve higher rates from their overnight deposits money dealers said as a result call money soared in active trading to around the lombard rate of five pct from pct yesterday as banks found themselves short of minimum reserve funds bundesbank figures showed that banks held an average daily billion marks in interest free minimum reserve assets at the central bank over the first days of the month though this was above the march requirement of billion actual holdings at the weekend were billion to meet the daily average dealers said banks must raise holdings by two billion marks to billion today and tomorrow but liquidity was tight in early business because banks excessively took up the bundesbank s offer for sale of treasury bills on friday this provides a rate of pct for three day deposits and is an effective floor to the market though some liquidity from bills bought on thursday flowed back into the market today the bulk would not return until tomorrow the start of the new month dealers said dealers said the large banks which they did not name commanded short term money requirements of as much as five billion marks or so with a knowledge of their own needs until the end of the month the banks bought excessive amounts of treasury bills draining liquidity for three days when other banks sought funds rates rose and large banks were able to place excess funds on deposit at a considerably higher average return one senior dealer said the bundesbank with advanced knowledge of the market s needs should have curtailed its sales of treasury bills on friday though dealers only late in the day learn of the total minimum reserve holdings of the previous day the bundesbank has an immediate overview of the situation and could anticipate the strength of demand for funds the following day he said bundesbank dealers could easily have said we are not selling any treasury bills or we re not selling them in this amount he said if the bundesbank wants to finely steer the market then they should avoid such excesses tomorrow it will be different call money will fall back to pct or so but the bundesbank would not approve of the sharp jump in rates given the delicate state of currency markets international central banks have been at pains to prevent a dollar fall against major currencies including the mark dealers said a rise in call money gives the mark a firmer undertone contributing to downward pressure on the dollar the whole tender policy is to have a call money of between three and four pct in that case the excesses as we have today cannot be very popular the senior dealer said dealers said the large banks probably achieved average rates of return on their excess funds of between pct or four pct this is a higher return than they would have earned without the excessive draining through the treasury bill mechanism because of the currency situation and the wage negotiations between germany s major employers and the unions the bundesbank would be very unlikely to make any changes to monetary policy at its council meeting on thursday they said bundesbank figures showed that banks fell back on the lombard emergency funding facility to draw down billion marks yesterday as rates began to tighten in late business reuter 
