Feeble Demand, Ample Funds Keep Call Composed

Easy liquidity coupled with feeble demand saw call rates ranged between 6.70 per cent and 6.85 per cent today, while government security prices moved up marginally.

The call rates, which opened in the 6.70-.80 cent range in the morning, remained static throughout the day. Gilt prices, however, went up by 5-10 paise across all the maturities, boosted by a cut in the lending and deposit rates by the State Bank of India.

A dealer said: "The liquidity condition was good. Moreover, as most of the banks and primary dealers have covered majority of their positions in the first couple of weeks of the reporting fortnight, there was little demand in the overnight market. Lenders were also quoting at a rate below the bank rate of 7 per cent."

The Reserve Bank of India (RBI) received a single bid of Rs 500 crore for the one-day repo auction which the central bank accepted at a cut-off rate of 6.50 per cent. Dealers said the bid was from a large state-run bank. The RBI, however, did not receive any bid for its three-day reverse repo auction.

Trading in the government securities market continued to be lacklustre as players are expecting the RBI announce an auction at any point of time. The treasury head of a private sector bank said: "It has been long since the RBI conducted its last auction. Moreover, the ways and means figure must have stayed way above the Rs 10,000 crore mark because of the salary payment and the redemption payment during the last couple of days of July. Hence an auction is on the card and this has kept most of the players out of action in the market."

Call money rates are expected to remain in the range of 6.70 per cent to 6.90 per cent tomorrow as liquidity condition may remain unchanged. Gilt prices are expected go up by 10-15 paise across all maturities if there is no auction. However, if the central bank announces any auction, prices may dip marginally depending on the tenure of the security.