Call Rates Ease, G-Secs Rally 35-40 P On All Maturities

Call money rates eased down to remain in the range of 6.70 per cent to 7 per cent today. The government security prices rallied sharply by 35-40 paise across all the maturities with the Reserve Bank of India (RBI) governor stating that the government borrowing programme will be within the target level.

Call rates opened in the range of 6.90 per cent to 7 per cent. However, they came down to close in the range of 6.70 per cent to 6.80 per cent. A dealer said, "Liquidity was ample in the market and there was hardly any demand for the overnight money. Lenders quoted a bit higher in the morning. However, as there was hardly any taker at that rate, they had to reduce the rates."

Even today, liquidity comfort in the system was visible through the RBI's liquidity adjustment facility auction. The RBI received a single bid of Rs 10,000 crore in the one-day repo auction, of which it accepted Rs 6,000 crore of the bid at a cut-off rate of 6.50 per cent. However, the central bank did not receive any bid for the one-day reverse repo auction.

Government security prices rallied sharply on the back of lower call money rates and RBI governor's statement. A dealer said, "The market was concerned over the finance minister's statement on giving fiscal boost to the economy. As the RBI governor ruled out the possibility of a major slippage in the borrowing programme, the sentiment recovered."

Dealers said that the prices initially moved up at the medium- and short-term segment, but the phenomenon was soon spread to the longer-segment of the market as well.

Call money rates are likely to remain in the range of 6.70 per cent to 7 per cent tomorrow as dealers do not expect major attack on the liquidity. And the government security prices are expected to move up by another 15-20 paise across all the maturities followed by profit-booking.