Auction Keeps Gilt Tags Ranged, Call Ends Easy

Prices of government securities remained rangebound ahead of the floating rate auction of Rs 4,000 crore five-year paper today. Call rates hovered around 6.50-6.85 per cent on the back of easy liquidity.

Gilt prices moved up a bit in the morning driven by ample liquidity in the banking system. The prices, however, tripped later in the day due to profit-booking. Dealers said the market is awaiting the auction result as it would indicate whether the Reserve Bank of India is comfortable with the recent rally in the gilt prices.

A dealer with a private bank: "There was no problem with the liquidity. However, the market is waiting for a signal from the RBI which would come through the auction cut-off."

Dealers also said that there was a rumour in the market that the RBI will do an open market sale of government security shortly, which dampened market sentiment.

Call money rates once again closed just above the repo rate of 6.50 per cent. Overnight rates opened around 6.60-6.85 per cent, but went down gradually to close at 6.50-6.60 per cent.

A primary dealer said, "Volume was low as there were not many borrowers in the market. This prompted the lenders to put their money in the repo auction."

The central bank today received four bids of Rs 7,235 crore in the one-day repo auction. All the bids were accepted at a cut-off rate of 6.50 per cent. There was no bid in the one-day reverse repo auction.

Call rates are likely to remain in the 6.50-6.75 per cent range tomorrow, while gilt prices could move up 10-15 paise in the aftermath of the auction.