Overnight Rates Rise To 6.90% In Intra-Day Trade

Call money rates rose to 6.90 per cent in early trade today as banks rushed for liquidity ahead of tomorrow's public holiday. Rates, however, slipped to close in the range of 6.50 per cent to 6.60 per cent on the back of adequate liquidity in the banking system. Government security prices remained stable on expectations of an auction announcement by the Reserve Bank of India.

Overnight rates opened in the range of 6.60 per cent to 6.75 per cent today and touch the day's high of 6.90 per cent within a few hours of trading.

Said a primary dealer: "The demand was high in the morning as a few private sector banks went for covering their cash reserve requirements. However, the liquidity condition was good and, as the demand came down in the later hours, overnight rates closed around the repo rate of 6.50 per cent."

Trading in the government securities market was dull throughout the day and most players were sidelined. The treasury head of a private sector bank said: "Going by the ways and means advances figure, there is likely to be an auction at any moment now and this has kept prices stable in the government securities market."

Dealers also said the market has been expecting a cut in the repo rate and, as the expectation was not realised, the sentiment was hit a little.

The Reserve Bank of India (RBI) today received two bids of Rs 3,560 crore in its two-day repo auction. The central bank accepted both the bids at a cut-off rate of 6.50 per cent.

The call and government securities market will remain closed tomorrow on account of Diwali.

Overnight rates should be in a range of 6.50 per cent to 6.75 per cent on Thursday. Dealers said most banks have already covered their cash reserve requirements and there will be no extra demand for overnight money on Thursday.

The government securities market is likely to remain stable with prices moving in a 10-15 paise band. In case an auction is announced, the movement of prices will depend upon the nature of the paper.