Call Rates Volatile

Call money market was very volatile toady with rates moving between 6.95-7.75 per cent.

Government security prices slumped by 50-60 paise across maturities on the back of Rs 8,000 crore of auction announcement to be held on Monday.

Call rates today opened in the 7.15-7.25 per cent range in the morning and went up to touch an intra-day high of 7.75 per cent within couple of hours. The rates, however, came down in the afternoon to close around 6.95-7 per cent.

A dealer with a private sector bank said, "There was concern over Rs 8,000 crore of auction in the morning and very few big lenders were present in the market. However, as overnight rates touched 7.75 per cent, state-run banks poured liquidity which pushed down call rates to close below the refinance rate of seven per cent."

The Reserve Bank of India (RBI) today received no bid for its three-day repo as well as reverse repo auction. Dealers said that the market participants were not ready to part with liquidity before Monday's auction.

In the government security market, prices dipped sharply after the auction announcement. A dealer said, "Prices had been at a very high level and it could only come down. Auction announcement was just an excuse for the players to sell their holding." Dealers, however, discounted liquidity problem and the auctions are likely to go through successfully.

"It is evident that there is enough liquidity with the state-run banks as they could supply enough funds to bring down call rates below seven per cent," said a dealer with a foreign bank. Call rates are likely to remain in the 6.80-7.25 per cent range tomorrow amid ample liquidity in the system. Government security prices are likely to remain stable with a downward bias on the eve of twin auction on Monday.