Gilts Suffer On Pm & #39;S Guilt Tripping, Call Soft

Call rates remained soft in the 6.90-7 per cent range on the back of ample liquidity in the system, while the government security prices dipped by 15-20 paise at the medium to long end of the market due to a bout of political uncertainty.

Call rates opened around 6.90-7 per cent in the morning and stayed there throughout the day.

A dealer with a private sector bank said, "The auction outflow of Rs 5,000 crore has returned to the market which has helped the liquidity condition to improve and overnights to hover around the refinance rate of seven per cent."

The improved liquidity condition was in evidence in the daily liquidity adjustment facility auction. The Reserve Bank of India (RBI) today received two bids of Rs 3,850 crore in its one-day repo auction. The central bank, has accepted both the bids partially and mopped up Rs 1,925 crore from the market at a cut-off of 6.50 per cent. The apex bank did not receive bids for its one-day reverse repo auction.

Government security prices suffered at the medium and long end of the market amid low trading volume. The chief dealer of a private sector bank said, "Prices have already appreciated to the extreme. The news that the prime minister has offered resignation, depressed the sentiment further causing fall in the prices."

Dealers also said that the latest fiscal deficit figure (released by the Central Statistical Organisation) which shows that fiscal deficit in the first quarter itself is to the tune of 56 per cent of the budgeted target has strengthened the possibility of slippage in the government borrowing programme. This has also hampered the sentiment in gilts market.

Call rates are likely to remain around 6.75-7 per cent tomorrow on the back of unchanged liquidity condition. Government security prices are expected to remain steady with a negative bias.