Call Ranged Around 7%, Gilts Rally

Call rates were range-bound today and closed at yesterday's level of 6.90-7 per cent on the back of ample liquidity.

Government security prices rallied by around 25-40 paise at the medium and long ends since yesterday as the Reserve Bank of India (RBI) governor has indicated that the soft interest rate bias of the apex bank will continue.

Call rates opened at around seven per cent and were quoted in the 6.90-7 per cent range for most part of the day.

"There was ample liquidity in the system and demand was matched by supplies. The governor's comment yesterday has revived hopes of a bank rate cut," a dealer with a private sector bank said.

At the one-day repo auction conducted by the RBI under the liquidity adjustment facility, it received one application for Rs 5,000 crore and accepted the same at a cut-off rate of 6.50 per cent. The apex bank did not hold reverse repo auction today.

Fund inflows into the banking system amounted to Rs 5,021.885 crore, while outflows were at Rs 5,000 crore. There was a net inflow of Rs 21.885 crore into the system.

In the government securities market, long-end papers moved up by around 40 paise since yesterday, while those at the medium end were up by around 25 paise. The securities at the short-end were up by 10 paise.

Call rates tomorrow are expected to rule in the 6.75-7 per cent range. Government security prices could move up by 10-15 paise, provided the RBI does not announce an auction.