Funds Keep Call In A Slot, Longer Securities Rear Up

Government security prices went up by 10-15 paise at the longer end of the market as the Reserve Bank of India (RBI) deputy governor, Y V Reddy, said the medium-term objective of the central bank is to bring down the cash reserve requirement (CRR) to three per cent. Call money rates stayed in the range of 6.50 per cent to 6.75 per cent due to ample liquidity in the system.

Government security prices rose 25-30 paise at the longer end of the market earlier in the day reacting to Reddy's statements in Kolkata and Chennai. Prices, however, came down later due to profit booking.

Said a primary dealer: "The impact of Reddy's statement was limited. First, he said it will come with a package containing other measures too. As the market was not sure of the other measures, it did not react sharply. Moreover, the prices are already at very high levels and it can go up from this level only when the measure will actually be announced."

In the call money market, liquidity kept the overnight rates soft and range-bound. Call rates opened in the range of 6.60 per cent to 6.85 per cent and closed in the range of 6.40 per cent to 6.60 per cent.

The treasury head of a private sector bank said: "The demand for overnight money was much lower today compared with that yesterday. That's why the rate was slightly lower."

The RBI today received three bids of Rs 6,385 crore. The central bank accepted all the bids at a cut-off rate of 6.50 per cent. There was no bid at the one-day reverse repo auction.

Government security prices are likely to remain stable tomorrow with an upward bias as the liquidity condition is good. However, dealers expect profit-booking to take place at higher levels. Call money rates should be in the range of 6.60 per cent to seven per cent.