Calls may rise on CRR hike effect

The demand may also be strong as banks will step up borrowing for the new Reporting Fortnight.

The two-day call rates for three-day loans are likely to trade in the 8.50-9.00 per cent band compared with Friday's closing of 6.50-6.75 per cent. CBLOs are seen in 8.00-8.50 per cent band.

Gilts: May weaken further

The gilt prices may weaken further on Monday. Worries over rising inflation and resultant monetary action by the RBI to tame the price rise could lead to more selling by investors.

Inflation touched a new 13-year high of 11.63 per cent in the week ended June 21, up from 11.42 per cent in the previous week. Since the liquidity is expected to tighten next week as the first stage of the CRR hike takes effect, the movement in call rate may impact gilts.

Traders will also eye the movement in global crude oil prices for more cues on inflation as sharp swings in oil prices could impact gilts.

Crude prices touched an all-time high of $145.85 a barrel on the New York Mercantile Exchange on Thursday.

On Monday, the 10-year benchmark 8.24 per cent, 2018 paper is seen in 9.15-9.20 per cent band.

Liquidity: Looks comfortable

The money supply in the banking system should be comfortable next week on expectations of a rise in government spending.

However, call money rate is likely to stay firm on Monday as the CRR hike will put immediate pressure on liquidity, which is likely to ease later in the week.

The call money rate may spike, but there will be no serious tightening in the money markets. As the credit demand is still lacklustre, banks may not face any cash crunch next week.