Call Rates Decline To 6 Per Cent

MONEY MARKET REPORT

Buying interest was witnessed in the securities market yesterday following the call rates falling to 6 per cent. The price of the 12.69 per cent 2002 went up to Rs 100.35, an increase of 12 to 15 paise over the earlier levels. The yield on treasury bills also moved down marginally.

The 364-day treasury bills maturing on October 10 were traded at an yield of 8.50 per cent as against 9 per cent a few days back. Sellers are now unwilling to sell the 364-day treasury bills at a discount.

As usual, it was the overnight rates in the inter-bank term money market that was the driving force. The indications are that the banks were exercising caution while buying securities.

This is in contrast to the gay abandon with which banks bought securities and prices sky-rocketed just one month back.

For the first time since the end of last month, when the Reserve Bank of India mopped up over Rs 5,300 crore at the sale of 10-year state government paper, the call rates came down to 6 per cent.

While there were some stray deals done at this level, money market dealers said that most of the transactions were struck at 6.5 per cent to 7 per cent.

Dealers said the overnight rates are likely to come down further in the coming days. Only then will there be a significant rise in the volumes in the secondary market.

Once the call rates stabilise, then the activity in the inter-bank term money market could actually pick up. At present, while lenders are asking for 11 per cent for three-year money, borrowers are offering a maximum of 9.5 per cent for a similar tenure and 10.5 per cent for six-month money.