Fund Glut Tempers Call, Gilts Inch Up

Call rates were in a narrow range of 6.50-6.60 per cent on the back of comfortable liquidity in the market. Gilt prices moved up by 15-20 paise at the medium and long end of the market amid lacklustre trade.

Call rates opened around 6.55-6.60 per cent and moved marginally during the day to close in the range of 6.50 per cent to 6.55 per cent. Money market dealers said the demand for overnight money was very low despite being the first day of the reporting fortnight.

A dealer with a private bank: "Almost all the banks were flush with funds and so the low demand for call money. Lenders did not find many takers and so they put their money in the repo auction."

The Reserve Bank of India (RBI) today received three bids of Rs 9,735 crore for its one-day repo auction. The central bank accepted all the bids at a cut-off rate of 6.50 per cent. The RBI, however, did not receive any bid for its one-day reverse repo auction.

Trading in gilts was dull in the morning but improved a bit during the course of the day. Trades were, however, restricted to the medium and long end of the market.

A dealer with a foreign bank said: "As the yields of government papers were already at very low levels, players were cautious that it can start moving up now. Moreover, the market was expecting another round of auction this week. However, the ample liquidity helped prices to go up."

Call rates will continue to hover around the 6.50 per cent level tomorrow, while security prices will remain rangebound on the back of today's auction announcement. A primary dealer said: "There will be no immediate impact on the liquidity and, hence, the call rates will remain the same as today. However, market participants said the gilts market will remain cautious before the auction and, hence, trading will remain subdued and the prices will be stable."