Call Winds Up Shy Of 7%, Gilts Zooms 45-50 Paise

Call money rates were traded in the 6.85-7.15 per cent band today on the back of easy liquidity. Government security papers went up sharply by 45-50 paise at the medium and the long end, tracking easy overnight rates.

Call rates today opened in the 7-7.15 per cent range and went up during the initial hours to touch 7.15 per cent. They came down later to close in the 6.85-6.90 per cent level.

"There was concern in the early hours due to the forex market volatility. But as the Reserve Bank of India (RBI) did not resort to any liquidity tightening measure, overnight rates came down gradually to close below the seven per cent level," a dealer said.

The apex bank today received a single bid of Rs 7,000 crore for its one-day repo auction. The central bank accepted the bid at a cut-off rate of 6.50 per cent.

"The bid gave comfort to the market which in turn resulted in the decline of overnight rates," a primary dealer said. The RBI did not receive any bid for its one-day reverse repo auction.

Prices in the government security market increased sharply notwithstanding the fall of the rupee against the dollar. "Two factors worked together: firstly, there was no intervention by the RBI in the forex market and, secondly, the good response to both the auctions held yesterday," a dealer with a private sector bank said.

According to the treasury head of a private sector bank, government security prices fell over the last two days because of the concern over the forex market condition without any real tightening of the liquidity. "Today's movement was a correction," he said.

Call rates are likely to be in the 6.80-7.15 per cent band amidst comfortable liquidity, while government security prices are likely to go up by another 10-15 paise during the day.