Rbi Guv & #39;S Positive Interest Outlook Fuels Gilts, Calls End Lower

Call rates hovered around 6.75 per cent on the back of very thin demand today. Government security prices continued to rally as the Reserve Bank of India (RBI) governor once again expressed a positive outlook on interest rates. Money market dealers said government security prices were up by 40-50 paise across all maturities today.

Call rates opened in the 6.75-6.80 per cent range in the morning and dipped a bit to close around 6.70-6.75 per cent.

A dealer with a private sector bank said, "Banks and primary dealers have already covered their positions for the fortnight resulting in very little demand in the market. On the other hand, liquidity continued to be ample. These kept overnights soft and range-bound. "

RBI received one bid of Rs 5,600 crore for its one-day repo auction. The central bank accepted the bid at a cut-off rate of 6.50 per cent. On the other hand, it did not receive any bid for its one-day reverse repo auction.

Government security prices continued its rally. Prices went up by 70-75 paise in the morning as the RBI governor reiterated a positive outlook on the interest rates. Prices, however, dipped in the afternoon as a news agency reported that a central banker had ruled out any bank rate cut in the near future. No possibility of an immediate rate cut lead gilts prices to fall a bit. The net gain in securities prices were in the range of 40-50 paise across all maturities.

Call rates are expected to remain in the 6.50-6.75 per cent range as the demand for overnight money will be very thin on the eve of the reporting Friday. Government security prices are expected to rise by 25-30 paise across all maturities due to ample liquidity and lower call rates.