Securities Dart Up 25-40 P, Overnight Rates Grooved

Government security prices went up by 25-40 paise across maturities, backed by easy liquidity in the system. Call money rates hovered in the range of 6.50 per cent to 6.70 per cent during the day.

Government security prices opened slightly higher and continued to go up during the day. Money market dealers said most of the rally was concentrated at the longer end of the market.

Said a primary dealer: "The liquidity conditions continued to remain good in the absence of the any auction of government paper or open market operations by the Reserve Bank of India (RBI). Market participants were cautious as the prices were already at very high levels, but it did not stop the rally."

In the call money market, rates were steady in the range of 6.50 per cent to 6.70 per cent throughout the day. There was enough supply from the public sector banks in the market, and it helped the call rates to settle just above the refinance rate of 6.50 per cent, dealers said.

Said a dealer with a private sector bank: "Being the initial part of the reporting fortnight, demand for the overnight fund was slightly higher. However, as all public sector banks are flush with funds, the rates did not shoot up."

In the one-day repo auction, the RBI today received seven bids of Rs 6,185 crore. All the bids were accepted at a cut-off rate of 6.50 per cent. There was no bid in the one-day repo auction.

Government security prices are likely to remain stable with an upward bias tomorrow. Dealers said the ample liquidity in the system will support the rally, but there will be cautious trading as there can be announcement of an open market auction. Dealers said there can even be profit-booking if the prices rise too much. The liquidity comfort will help call money rates to hover around 6.50 per cent to 6.75 per cent.