Hardening Of Calls On Cards

MONEY MARKET

Call money rates are expected to firm up during this week. After opening in the region of 3.5-4 per cent call rates had declined to less than one per cent by the end of last week.

While the easy liquidity position is expected to persist during this week, dealers expect the call to open today in the region of 4 per cent.

However, they do not expect the rates to go beyond five per cent during the week.

On Saturday, while the call firmed up to 3-4 per cent, there were some stray deals reported even at five per cent. The reason for this was the absence of lenders due to the repo auction on Saturday.

The benchmark would however be set by the cut off in the repo auctions on Saturday.

The RBI, which set the cut off at 4.9 per cent, accepted 44 bids mopping up Rs. 3665 crore. the Reserve Bank had received 59 bids to the tune of Rs 4890 crore. The weighted average repo rate was 4.78 per cent.

However, this outflow is not expected to reverse the liquidity position in the market. Earlier, the central bank had mopped up a total of Rs 6868 crore through repo auctions on January 25 and January 29.

Sources point out that the earlier repo auction too had negligible effect on the call rates.

The announcement allowing the foreign institutional investors access to the gilts market saw the security prices temporarily firming up, only to revert back again.

Dealers expect the prices of shorter dated securities to firm up by 15 to 20 paise. Among the dated securities the most actively traded ones have been the 13.50 per cent 1998, 13.50 per cent 1999 and the zero coupon bond 2000.

This trend is expected to persist.With the call rates ruling easy during the course of last week, the secondary market witnessed increased activity in the treasury bills segment.

According to a primary dealer, the nationalised banks who were saddled with short term surpluses were among the most active buyers.

In line with expectations, the cut off yield in the 91-day T-bill auction worked out to 7.52 percent.

Money market dealers had expected the cut off to be in the region of 7.5 and 7.6 per cent. The actual cut off was lower than that at the earlier auction by 52 basis points.

While a majority feel the yields are headed downwards the market seems split on the extent of decline.

While some believe that yields could fall to seven per cent others opine that at best the yields at the auctions could fall by 20 to 30 basis points.