Call Rates In 6.70-7 Band On Thin Demand, Gilts Up

Call money rates remained in the 6.70-7 per cent range due to the comfortable liquidity position. Government security prices went up by 40-15 paise at the long end amidst comfortable liquidity and on the expectation of tomorrow's redemption inflows worth Rs 8,500 crore.

Call rates opened in the 6.95-7 per cent band and declined to close in the 6.70-6.75 per cent level.

"Some banks had kept uncovered position and they rushed for liquidity in the morning. Call rates were high during the initial hours, but as the demand eased off, overnight rates too dipped," a dealer with a private sector bank said. Dealers said most of the deals were done in the 6.75-6.85 per cent range.

The Reserve Bank of India did not receive any bid to for its one-day repo as well as reverse repo auction.

Prices in the government security market went up sharply as participants expected further easing of the liquidity position after tomorrow's redemption.

"Gilt prices have been rising since the beginning of the week. As there is no chance of auction in the near future and a huge redemption is slated for tomorrow, prices rose sharply," the treasury head of a private sector bank said.

Call rates are expected to remain in the 7-7.10 per cent band on the back of easy liquidity while government security prices are expected to move up by 15-20 paise at the medium to the long end.

"We expect no auctions next week and hence the liquidity would remain comfortable. In such a condition we hope prices to move up gradually," a dealer with a private sector bank said.

Dealers said the market sentiment was good, and even if the yields are already low, they are likely to slip further.