Call Dips Below 7%; Long-Run Gilts Up 10-15 Paise

Call money rates went down to close in the range of 6.80 per cent to 6.90 per cent today compared with yesterday's closing range of 7 per cent to 7.25 per cent as the liquidity condition eased further. The government security prices went up by 10-15 paise at the medium- to long-end of the market on the back of a lower call money rate.

Call rates opened in the range of 7 per cent to 7.25 per cent but fell during the day. Dealers said most of the deals were done in the 7-7.15 per cent band. A dealer with a private sector bank said, "The state-run banks, flooded with deposits, were lending heavily in the market which brought down the overnight rates below the bank rate."

There were no bids for both the one-day repo auction and the reverse repo auction as lenders preferred call money. A dealer said, "The call rates, though lower than yesterday, were higher than the repo cut-off of 6.50 per cent. That's why lenders preferred the overnight market."

The government security prices continued to go up as the overnight rates fell further. Dealers, however, said the rally was short and was concentrated at the medium- to long-end of the market. A primary dealer said, "The market is expecting an auction of long-term securities very shortly. This has kept the long-term segment of the market range-bound."

Call money rates are expected to remain in the range of 6.50 per cent to 7 per cent tomorrow because of the comfortable liquidity position. A senior dealer said, "The liquidity position has turned good once again and it is likely to remain so tomorrow. Hence, I expect the overnight rates to hover between the repo cut-off rate and the bank rate." With easy call money rates, prices of government securities are likely to move up by another 10-15 paise.