Holiday Covering Keeps Call Firm, Gilts Snipped

Government security prices dropped today by 20-25 paise amid very low trading. Call rates hovered in the 6.75-7.25 per cent range with market participants covering for two days, tomorrow being a holiday.

Government security prices opened lower and slipped further. Price of the benchmark 10-year paper fell to Rs 122.30 from Saturday's closing of Rs 122.50. Players stayed on the sideline as they were unable to take a view on the border situation.

According to dealers, an insurance company bought long-dated papers in the afternoon that boosted the market sentiment a bit.

A primary dealer said, "There was enough liquidity. But as the border situation remained tense and the rupee weakened against the dollar, prices fell a bit."

Dealers said many of the foreign banks were absent on account of their approaching financial year closing. This also pushed down the trading volumes.

Call rates opened around 7-7.25 per cent. Later they eased a bit to close in the 6.80-7 per cent range.

A dealer with a private sector bank said, "Demand was a bit higher as banks were covering for two days. There was no other pressure in the call market."

There was no bid in the two-day repo and reverse repo auction. Money market dealers said that market participants were not in a mood to part with liquidity and hence did not opt for putting money in the repo auction.

Money market will remain closed tomorrow. Dealers are expecting the government security market to open on a bearish note on Wednesday. However, they said that much will depend upon the developments in the India-Pakistan border situation. In the call market, interest rates should be around 6.60-7.05 per cent following easy liquidity.