Calls Hover Around 7%, Gilts Rally

Call money rates stayed in the range of 6.70 per cent to seven per cent amidst ample liquidity in the market, while government security prices went up by 10-15 paise at the longer end of the market.

Call money rates opened in the region of 6.90 per cent to seven per cent in the morning. The rates, however, came down during the day to close in the region of 6.70 per cent to 6.80 per cent.

A primary dealer said, "lenders were quoting at seven per cent in the morning, but could not find enough borrowers, which pushed down the call money rates."

A dealer with a private sector bank added, "as most of the banks have already covered their positions in the last week, taking advantage of the lower call money rates, demand was thin in the market."

The comfortable liquidity was evident from the repo auction in which the central bank accepted a single bid of Rs 10,500 crore at a cut-off rate of 6.50 per cent. Dealers feel the bid was from one of the large nationalised banks.

The apex bank, however, did not find any takers for the reverse repo facility. Dealers said very few players resorted to the back-stop facility at the cut-off rate, pegged at 9.50 per cent.

Government security prices rallied at the longer end of the market taking advantage of the lower call money rate.

A dealer with a private sector bank said, "there was concern over today's auction of Rs 5,000 crore. But as the call money rates were easy, prices rallied at the longer end of the market."

Call money rates are likely to be in the range of 6.50 per cent to seven per cent tomorrow. The treasury head of a private sector bank said, "today's repo auction indicated that there is enough money in the system which will keep the overnight rates below seven per cent tomorrow."

Government security prices are expected to rally by 10-15 paise on the back of soft call money rates and comfortable liquidity.