Overnight Rates Ranged, Gilts Look Up 10-15 Paise

Call rates continued to hover around the refinance rate of seven per cent today as the liquidity situation remained easy.

Government security prices went up by 25-30 paise in the morning and came down during the day to close around 10-15 paise higher than yesterday's closing.

Overnight rates opened higher in the 7.10-7.15 per cent range on account of concerns over tomorrow's 10-year paper auction for Rs 5,000 crore. Call rates, however, slipped later to close around 6.90-7.10 per cent.

A dealer with a private sector bank said, "The liquidity situation is at comfortable levels. However, there were a bit of psychological pressure on call rates in the initial hours because of tomorrow's auction. The pressure faded out during the day."

The Reserve Bank of India (RBI) did not receive any bids at its one-day repo as well as reverse repo auctions.

The treasury head at a private sector bank said, "Big nationalised banks, which generally put money in the repo auction, was saving liquidity for tomorrow's auction and did not bid at the repo auction."

Government security prices opened higher. Dealers said that there has been some trading interest in illiquid stocks. But later prices fell a bit due to concerns over tomorrow's auction.

A dealer with a nationalised bank said, "Prices have been range-bound for the past couple of days as the yields have reached the bottom. But as the central bank announced the re-sale of illiquid stocks, indicating that it may move towards bringing down the yield-differential between similar maturity stocks, there has been buying interest for those papers.

Call rates are expected to remain in the 6.90-7.15 per cent band tomorrow with the liquidity position remaining comfortable, while gilts prices are likely to go up by 10-15 paise at the short and medium end.