Gilts Sag On Profit-Booking, Overnights Soft

Government security prices closed 20-30 paise lower today across the maturity as the banks opted for profit-booking today. Call rates remained soft and hovered in the 6.10-6.20 per cent range throughout the trading hour.

In the government securities market, liquidity condition was good. But the sentiment was slightly subdued as there could be slight tightening of liquidity in the near future because of the advance tax outflow. Moreover, there was rumour in the market that there can be open market operation (OMO) by the central bank as there is excess liquidity in the market.

A dealer with a foreign bank said: "Yields are already a bit low and we do not expect the central bank to allow it to fall further and that is why even if the prices opened higher, there was immediate profit-booking."

In the call market, flush of funds kept overnights steady and the easiness of the liquidity was reflected in the repo auction where the Reserve Bank of India accepted a single bid of Rs 6,500 crore. The apex bank accepted Rs 4,875 crore of the bid at a cut-off rate of six per cent. According to the dealers, the bid was from a large public sector bank.

Call rates are expected to remain low around 6-6.25 per cent tomorrow as the liquidity will remain easy. Moreover, tomorrow being the reporting Friday, the demand for overnight money will be low as well.

A dealer with a public sector bank said, "It seems that most of the banks have covered their cash reserve ratio, and hence there will be very little demand for call money." The government security market is likely to remain in sell mode. Money market dealers are expecting the prices to fall by 15-25 paise across the maturity.