Harare — SHORT-TERM deposit rates marginally firmed yesterday on weaker liquidity, as the Zimbabwe Stock Exchange dragged in early morning trade.

Rates on 90-day NCDs rose to over 100 percent from as low as 50 percent last week on the back of anticipated huge statutory reserve payments.

Several billions of dollars were to be taken out of the market yesterday, as banks paid up the 45 percent statutory requirements.

On Friday, the money market closed up $14 billion but was yesterday expected to end down nearly $1 billion.

Some banks were still quoting rates in the region of between 50 percent and 70 percent on 30-day paper.

Others did not trade instruments of tenor two weeks and below due to unattractive rates and fragile investor- interest.

Call money was being quoted around 4 percent while the interbank overnight rate touched a low of 40 percent last week. A treasury dealer at FBC Bank Ltd in Harare said yesterday: "The underlying matter is that surplus conditions are expected to continue in the market, despite temporary weaknesses that may result from statutory reserve payments.

"This is of one the key reasons why interest rates have remained depressed over the months."

The Reserve Bank has also maintained a tight interest rate policy, vowing to leave rates unchanged, as a weapon to fight speculative tendencies.

Still, the market does not expect Governor Gideon Gono to shift his rate stance in his pending monetary policy review. The key bank rate has remained at 600 percent since the first quarter. This was expected to put a leash on borrowing which was already expensive at 650 percent.

With rates unmoved, little movement was thus expected on the foreign currency front, which was adjusted recently to Z$30 000 against the greenback.

Dealers predicted the September 6 fiscal policy would see the continued release of funds into the market through gold purchases and other expenditure, and dampen interest rates.

The outlook for the money market thus remained unexciting, dragged by weak inflation at over 7 634 percent.

"We expect very subdued interest rates in the last quarter of the year as the upcoming Monetary Policy Statement is unlikely to bring any changes to the current low interest rate policy," explained one Harare analyst.

But low interest rates have helped equities break record territory. Stocks have advanced on the back of negative inflation against which they have managed to hedge. In early morning trade yesterday, most counters did not trade. Natfoods plunged 21,4 percent while clothing retailer Truworths eased 2,25 percent at 10:15am.

Investors remained concerned about the state of affairs in the retail sector after major retailer Meikles Stores, Edgars and Truworths reported last week they had scrapped credit purchases due to low stocks.

Edgars warned it would not be adequately stocked for the Christmas holiday and that normal stockholdings would only be expected in April next year with the right pricing models.

Early gains were reported in Nicoz up 11,11 percent, General Beltings adding 18,4 percent, reinsurer ZHL rose 14,3 percent while brickmaker Willdale was up 13,6 percent.