Call Ranged, Govt Papers Slump

Call rates remained in the 6.80-7 per cent range Thursday on the back of comfortable liquidity in the system, while government security prices went down by 10-15 paise amidst lacklustre trading.

Call rates opened higher in the 6.95-7 per cent range, but came down during the day to close in the 6.80-6.85 per cent band. A primary dealer said, "The lenders were quoting high in the morning on the eve of the Rs 6,000 crore auction. However, there was hardly any taker in the market and this forced the lenders to quote at a lower rate later in the afternoon."

The liquidity overhang in the system was reflected at the repo auction. The Reserve Bank of India (RBI) today received one bid of Rs 9,550 crore at its one-day repo auction which the apex bank accepted at a cut-off rate of 6.50 per cent. Dealers said that the bid was from a large nationalised bank.

Trading in government securities was dull today as many of the market participants stayed in the sidelines on the eve of the open market auction.

A dealer with a private sector bank said, "There was no problem with the liquidity situation. But market players feel that the RBI, through recent open market operations, has given the signal that yields are too low to be sustainable and this has dampened the buying interest."

Call rates are likely to remain in the 6.75-7 per cent band tomorrow as the liquidity condition will remain little changed despite the auction outflows.

The treasury head at a private sector bank said, "There is little demand for liquidity in the market as most of the banks are flooded with deposit inflows.

In such a situation, Rs 6,000 crore of outflows is not likely to have much impact on call rates." Government security prices are expected to remain in a 10-15 paise range on either side of today's levels.