New reporting fortnight pushes call

MONEY MARKET ROUND-UP

The one-day call rates ended at 9.25-9.50 per cent compared with 9.00-9.10 per cent on Saturday for two-day loans. CBLOs were traded at weighted average rates of 8.39 per cent on Monday, down from 9.35 per cent on Saturday.

"The call rates stayed firm today as liquidity continued to be under pressure. And since we have just begun a new fortnight, the demand too was high," said a dealer with a private bank.

The total traded volumes in the call market were Rs 18,972 crore on Monday, higher from Rs 10,600 crore on Friday, an indication of a strong demand for funds.

There was also pressure on liquidity because Rs 10,000 crore moved out from banks as payments for the two government bonds auctioned on Friday. On Monday, banks borrowed Rs 31,500 crore through Reserve Bank of India's repo tender, while the central bank made no liquidity infusion on Friday.

Gilt: Softening prices

Government bond prices ended down on Monday because most investors preferred to stay light in the absence of any fresh triggers and due to persisting worries over higher inflation, dealers said. The 10-year benchmark 8.24 per cent, 2018 paper settled at Rs 94.08 or 9.1655 per cent yield-to-maturity on Monday compared with Rs 94.15 or 9.1539 per cent on Friday.

"We should expect the market to move in a range-bound manner in the coming days because nobody will be willing to take any big risks with worries over inflation still very much present," said S Srinivasa Raghavan, head of treasury, IDBI Gilts.

"The finance ministry has already predicted inflation will reach 13 per cent. The only question is when", he added. Inflation for the week ended June 21 soared to a new 13-year high of 11.63 per cent from 11.42 per cent a week ago.

However, volumes did pick up on Monday with the 10-year benchmark paper clocking Rs 1,400 crore, more than double Friday's Rs 590 crore. "The rise in volumes in the 2018 paper is because of the fresh supply. People are just trying to make up for theIr recent losses," said a dealer with another primary dealership.

The price of the 2018 paper fell by over Rs 2 on Friday after Reserve Bank of India awarded higher-than-expected cut-off yields at the gilt's auction on Friday.