Rbi Pumps In Moolah, Overnights Dip, Gilts Hop

Call rates were traded in the 6.95-7.50 per cent range today. Government security prices hardened by 50 paise to Re 1 at the medium to long end as the forex market sentiment improved and the Reserve Bank of India (RBI) infused liquidity through open market purchases of government bonds.

Call rates today opened higher around 7.50 per cent. The rates, however, slipped during the day as public sector banks offered liquidity around the bank rate of seven per cent. Money market dealers said that the State Bank of India was the most prominent lenders.

A dealer with a private sector bank said: "Many of the banks and primary dealers had not covered their positions for the fortnight and that is why the overnight rates were high in the morning. But the supply of funds from the nationalised banks brought the rates below seven per cent."

The RBI today received a single bid of Rs 100 crore for its one-day repo auction which the central bank accepted at a cut-off rate of 6.50 per cent. The apex bank, however, did not receive any bid at its one-day reverse repo auction.

Government security prices recovered further today on the back of easy call money rates and the injection of liquidity by the central bank through open market purchases. The open market purchase window will remain open till Thursday.

Call rates are likely to remain in the 6.75-7.25 per cent band tomorrow. A dealer with a private sector bank said, "The liquidity condition will be much improved tomorrow following the infusion of liquidity following open market purchases by the central bank. Moreover, as most of the banks have covered their positions, there will be less demand as well."

Government security prices are expected to recover by another 35-40 paise tomorrow on the back of easy liquidity and soft call rates.