Low Demand, Easy Liquidity Culls Call, Gilts Grooved

Call rates ended lower today to close at the 6.90-7.00 per cent level as compared with the previous close of 7.00-7.10 per cent on the back of easy liquidity. Government securities, across the board, were range bound.

Most of the deals in the morning were struck around 7.10-7.20 per cent. Later a large state-owned bank entered the market and quoted funds at 6.80-6.95 per cent, which lead to calls crashing to the 6.80-6.95 per cent level.

"Trading was dull and lacklustre, being the second week of the reporting fortnight, as most of the players had already covered themselves," a dealer with a private sector bank said.

The one-day repo auction, conducted by the Reserve Bank of India (RBI) under the liquidity adjustment facility, evoked one bid of Rs 5,000 crore and the apex bank accepted the same at a cut-off rate of 6.50 per cent. The apex bank did not conduct any reverse repo auction.

The inflows into the banking system were estimated at Rs 1,500 crore while the outflows amounted to Rs 5,100 crore resulting in a net outflow of Rs 3,600 crore.

Market players expect call rates to stay at the current levels till Saturday. The outflow on account of advance taxes on June 15 will be felt in the following week.

The government securities were range bound across the board, with 5 paise drift either way. The most traded 11.40 per cent 2008 paper was stagnant. Dealers said some bidding interest was coming back into the underpriced and out-of-yield-curve four, five and six year papers.

Call rates will be range bound tomorrow (6.80-7.00 per cent levels) while no rally is expected in the government securities market though there might be some profit booking.