Gilts Lacklustre On Auction Buzz, Call At Sub-Refin Level

Call rates stayed below the refinance rate of seven per cent today on the back of comfortable liquidity in the system.

Government security prices remained steady with volumes remaining low. Dealers said the prices across all the maturities went up by 5-10 paise.

Call rates opened in the 6.70-6.90 per cent range in the morning and stayed there throughout the day.

A dealer said, "The liquidity condition has turned good since the beginning of the current week and banks and primary dealers have covered their position in the first couple of days of the week. Lenders were quoting at a premium over the repo rate though there were not many borrowers for that."

The ample liquidity was reflected in the daily liquidity adjustment facility auction as well.

The Reserve Bank of India (RBI) received a single bid of Rs 6,000 crore for the three-day repo auction which the central bank accepted at a cut-off rate of 6.50 per cent.

Dealers said that the bid was from a large nationalised bank. The central bank did not receive any bid for its three-day reverse repo auction.

Trading in the government security market continued to be lacklustre as the players are expecting auction announcement from the RBI.

The treasury head of a private sector bank said, "There was no buying interest in the government security market because of two reasons -- firstly, the market is expecting an auction of at least Rs 5,000 crore very shortly and secondly, the prices have already appreciated too much and hence there is not much appetite."

Dealers, however, expect the prices to rally a bit after the auction. Call rates are expected to remain around 6.70-6.90 per cent tomorrow as the liquidity condition is likely to remain unchanged.

Government security prices are expected go up by 10-15 paise across all the maturities driven by ample liquidity and soft call.