Overnight Rates Hover Around Repo, Gilts Inert

Call money rates remained between 6.50 per cent and 6.60 per cent today because of ample liquidity in the banking system. Government security prices, too, were in narrow range with buying interest seen in those with yield differentials.

In the call market, most of the deals were struck in the range of 6.50-6.60 per cent. The overnight rates touched an intraday high of 6.70 per cent.

About the excess liquidity in the market, a dealer with a public sector bank said: "Even if there is an outflow of about Rs 5,000 crore by way of an auction or an open market operation, the market will be able to absorb it easily."

At the one-day repo auction, held under the liquidity adjustment facility, the Reserve Bank of India received four applications amounting to Rs 715 crore. The central bank accepted the applications at a cut-off rate 6.50 per cent. There were no bids for the 14-day repo auction.

There was a net outflow of Rs 65 crore from the banking system -- inflows stood at Rs 650 crore, while the outflows were Rs 715 crore.

Trading in the government securities market was lacklustre and was marked by profit-booking. Overall, the securities appreciated by 10 paise.

The benchmark 11.03 per cent 2012 (10 year) paper remained between Rs 126.80 and Rs 126.90 (yield 7.31-7.30 per cent). On Saturday, this security was dealt at Rs 126.80 (yield 7.31 per cent).

A dealer with a public sector bank said, "Market players showing interest in those securities which have yield differential." For example, the 10.71 per cent 2016 paper opened at Rs 126.50 (yield 7.61 per cent) and appreciated to Rs 126.85 per cent (7.58 per cent), giving a gain of 35 paise.

Call money rates will remain between 6.50 per cent and 6.60 per cent tomorrow also, while the government security prices will see profit-booking for every 10 paise rise.