Overflowing Kitty Dulls Call, Long Gilts Spurt

Call rates remained in the 6.50-6.75 per cent range today amid comfortable liquidity in the market. Government security prices rallied by 20-25 paise at long end of the market.

Call rates today opened around 6.50-6.75 per cent in the morning and stayed there throughout the day. Dealers said that there was not much demand for overnight money as most of the banks are flushed with liquidity.

Said a primary dealer, "The demand for the call money has dropped after the reduction in the cash reserve requirement. This has kept call rates close to the repo rate of 6.50 per cent."

The comfortable liquidity was reflected in the daily liquidity adjustment facility auction. The Reserve Bank of India (RBI) today received five bids of Rs 9,400 crore in its one-day repo auction. The central bank accepted all the five bids at a cut-off of 6.50 per cent. The apex bank did not receive any bid for its one-day reverse repo auction. According to the dealers, public sector banks were the main participants in the repo auction.

Government security prices though remained stable at the short and medium end, rallied at the long end of the market.

A dealer with a private sector bank said, "The market is expecting an auction announcement at the long end. Generally when there is an auction, prices move down, but this time as the auction is expected to receive oversubscription, prices went up a bit." Dealers said that the rally was mainly concentrated at the more than 15 years maturity segment of the market.

Call rates are likely to remain in the 6.50-6.75 per cent range tomorrow as no drastic change in the liquidity condition is expected. In the government security market, prices are likely to stage short rallies at the very long run like today.