Tepid Demand Keeps Call Soft, Gilts Resume Rally

Call money rates remained in a tight range of 6.70 per cent to 6.95 per cent on the back of light demand today. And the government security prices moved up by 20-25 paise at the medium-end of the market as the liquidity continued to remain comfortable.

Call rates opened in the range of 6.75 per cent to 6.95 per cent and remained there for most of the time. However, the overnight rates dipped in the later hours of the day and closed in the range of 6.70 per cent to 6.90 per cent.

A dealer with a private sector bank said, "There was virtually no demand in the market as most of the banks and primary dealers had covered their positions for the fortnight. This, coupled with the ample liquidity in the market, kept the overnight rates soft and range-bound."

The Reserve Bank of India, for its one-day repo auction, has received only one bid of Rs 600 crore, which it accepted at a cut-off rate of 6.50 per cent. The central bank did not receive any bid for the one-day reverse repo auction.

The prices of government securities resumed rally after a dull trading day yesterday. However, the dealers said that the rally was mostly concentrated in the medium-term segment.

A senior dealer said, "There has been sharp appreciation of the prices at the longer-end of the market in the last couple of months which initiated the trading interest to shift towards the medium-term segment."

Call money rates are expected to remain in the range of 6.50 per cent to 6.75 per cent tomorrow. A dealer with a nationalised bank said, "Till today, there has been hardly any demand in the market and it is likely to go down further tomorrow, as most of the players have already covered their positions in the first two days of the week." And the government security prices are expected to rise by 15-20 paise at the medium-term due to ample liquidity and a lower call rates.